nep-reg New Economics Papers
on Regulation
Issue of 2019‒08‒26
thirteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. State mandates on renewable heating technologies and the housing market By Germeshausen, Robert; von Graevenitz, Kathrine
  2. Vehicle-to-Anything (V2X) Energy Services, Value Streams, and Regulatory Policy Implications By Andrew W Thompson; Yannick Perez
  3. The Risk of Policy Tipping and Stranded Carbon Assets By Rick van der Ploeg; Armon Rezai
  4. The future of road transport By ALONSO RAPOSO Maria; CIUFFO Biagio; ARDENTE Fulvio; AURAMBOUT Jean Philippe; Gianmarco BALDINI; Robert BRAUN; Panayotis CHRISTIDIS; Aris Christodoulou; Amandine DUBOZ; Sofia FELICI; Jaime FERRAGUT; Aliki GEORGAKAKI; Konstantinos GKOUMAS; Monica GROSSO; Maria IGLESIAS; Andreea JULEA; Jette KRAUSE; Bertin MARTENS; Fabrice MATHIEUX; Gerhard MENZEL; Silvia MONDELLO; Elena NAVAJAS; Ferenc PEKAR; Ioan RAILEANU; Harald SCHOLZ; Marie TAMBA; Anastasios TSAKALIDIS; Mitchell VAN BALEN; Ine VANDECASTEELE
  5. Competition and Pass-Through: Evidence from Isolated Markets By Genakos, Christos D.; Pagliero, Mario
  6. Economic and environmental impacts of UK offshore wind development to 2029: the importance of local content By Grant Allan; David Comerford; Kevin Connolly; Peter McGregor; Andrew G Ross
  7. Utilities Included: Split Incentives in Commercial Electricity Contracts By Katrina Jessoe; Maya Papineau; David S. Rapson
  8. Correct Me If You Can - Optimal Non-Linear Taxation of Internalities By Andreas Gerster; Michael Kramm
  9. Nonlinear Pricing with Average-Price Bias By Martimort, David; Stole, Lars
  10. Effect of Transmission Integration on Prices of Congestion Revenue Rights: Evidence from the Texas Electricity Market By Doshi, Gaurav; Du, Sheldon
  11. Public food procurement and the support of smallholder farming: the importance of a conducive regulatory framework By Luana F. J. Swensson
  12. Economic activity supported by offshore wind: a hypothetical extraction study By Grant Allan; Kevin Connolly; Peter McGregor; Andrew G Ross
  13. District heating networks: enhancement of the efficiency By Ugis Sarma; Girts Karnitis; Janis Zuters; Edvins Karnitis

  1. By: Germeshausen, Robert; von Graevenitz, Kathrine
    Abstract: We study the effect of a state level mandate on renewable heating technologies on the housing market. The mandate requires a minimum share of 10 % renewable energy sources when changing the heating system in the existing building stock. As renewable energy sources are still more expensive than conventional alternatives this mandate could lower the relative price of homes in the existing building stock when a replacement of the heating system is impending. We implement a two stage difference-in-differences nearest neighbor matching approach to identify the effect on prices taking advantage of differences in regulation by location and vintage of the building stock. Our results find no evidence of an effect of the mandate on housing prices.
    Keywords: Building regulations,Renewable energy sources,Hedonic pricing
    JEL: Q42 Q48 Q58
    Date: 2019
  2. By: Andrew W Thompson (RITM - Réseaux Innovation Territoires et Mondialisation - UP11 - Université Paris-Sud - Paris 11, VeDeCom - VEhicule DEcarboné et COmmuniquant et sa Mobilité); Yannick Perez (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec, VeDeCom - VEhicule DEcarboné et COmmuniquant et sa Mobilité)
    Abstract: Vehicle-to-Anything (V2X) is an umbrella term to explain the use of Electric Vehicle (EV) batteries to derive additional value during times of non-use. V2X services generate revenue from the battery asset through dynamic (V1X) or bi-directional (V2X) charging to provide benefits to the electric grid, to reduce energy consumption of buildings and homes, or to provide backup power to loads. While relatively unknown and still regarded as a nascent technology, V2X exhibits low capital costs and enabling costs have decreased by 90% since 2014. We present the V2X Value Stream Framework as a means to better communicate and categorize its full economic potential. A meta-analysis of Value Stream potential gives results contradictory to the literature and indicates that Bill Management, Resource Adequacy, and Network Deferral are more valuable than Energy Arbitrage and Spinning Reserves. We distinguish between Energy and Power Value Streams and show how the latter cause less battery degradation and allow for greater stacking of services. Finally, energy policy recommendations are given to better integrate V2X. While we concur that development is of and by the market, we emphasize that V2X will develop within the constraints of the regulatory environment; therefore regulators have an enabling role to play.
    Keywords: Vehicle-to-Grid (V2G),Ancillary Services,Lithium-Ion Battery Degradation Costs,Lithium-Ion Battery Degradation Modeling,Vehicle-to-Anything (V2X)
    Date: 2019–08–12
  3. By: Rick van der Ploeg; Armon Rezai
    Abstract: If global warming is to stay below 2°C, there are four risks of assets stranding. First, substantial fossil fuel reserves will be stranded at the end of the fossil era. Second, this will be true for exploration capital too. Third, unanticipated changes in present or expected future climate policy cause instantaneous discrete jumps in today’s valuation of physical and natural capital. Fourth, if timing and intensity of climate policy are uncertain, revaluation of assets occurs as uncertainty about future climate policy is resolved. E.g. abandoning climate policy plans immediately boosts scarcity rent, market capitalization, exploration investment and discoveries. To explain and quantify these four effects, we use an analytical model of investment in exploration capital with intertemporal adjustment costs, depletion of reserves and market capitalization, and calibrate it to the global oil and gas industry. Climate policy implements a carbon budget commensurate with 2°C peak warming and we allow for different instruments: immediate or delayed carbon taxes and renewable subsidies. The social welfare ranking of these instruments is inverse to that of the oil and gas industry which prefers renewable subsidy and delaying taxes for as long as possible. We also pay attention to how the legislative “risk” of tipping into policy action affects the timing of the end of the fossil era, the profitability of existing capital, and green paradox effects.
    Keywords: fossil fuel, exploration investment, discoveries, stranded carbon assets, stock prices, irreversible capital, adjustment costs, policy tipping, botched climate policies
    JEL: D20 D53 D92 G11 H32 Q02 Q38 Q54
    Date: 2019
  4. By: ALONSO RAPOSO Maria (European Commission - JRC); CIUFFO Biagio (European Commission – JRC); ARDENTE Fulvio (European Commission - JRC); AURAMBOUT Jean Philippe (European Commission - JRC); Gianmarco BALDINI (European Commission - JRC); Robert BRAUN (European Commission - JRC); Panayotis CHRISTIDIS (European Commission - JRC); Aris Christodoulou (European Commission - JRC); Amandine DUBOZ (European Commission - JRC); Sofia FELICI (European Commission - JRC); Jaime FERRAGUT (European Commission - JRC); Aliki GEORGAKAKI (European Commission - JRC); Konstantinos GKOUMAS (European Commission - JRC); Monica GROSSO (European Commission - JRC); Maria IGLESIAS (European Commission - JRC); Andreea JULEA (European Commission - JRC); Jette KRAUSE (European Commission - JRC); Bertin MARTENS (European Commission - JRC); Fabrice MATHIEUX (European Commission - JRC); Gerhard MENZEL (European Commission - JRC); Silvia MONDELLO (European Commission - JRC); Elena NAVAJAS (European Commission - JRC); Ferenc PEKAR (European Commission - JRC); Ioan RAILEANU (European Commission - JRC); Harald SCHOLZ (European Commission - JRC); Marie TAMBA (European Commission - JRC); Anastasios TSAKALIDIS (European Commission - JRC); Mitchell VAN BALEN (European Commission - JRC); Ine VANDECASTEELE (European Commission - JRC)
    Abstract: A perfect storm of new technologies and new business models is transforming not only our vehicles, but everything about how we get around, and how we live our lives. The JRC report “The future of road transport - Implications of automated, connected, low-carbon and shared mobility†looks at some main enablers of the transformation of road transport, such as data governance, infrastructures, communication technologies and cybersecurity, and legislation. It discusses the potential impacts on the economy, employment and skills, energy use and emissions, the sustainability of raw materials, democracy, privacy and social fairness, as well as on the urban context. It shows how the massive changes on the horizon represent an opportunity to move towards a transport system that is more efficient, safer, less polluting and more accessible to larger parts of society than the current one centred on car ownership. However, new transport technologies, on their own, won't spontaneously make our lives better without upgrading our transport systems and policies to the 21st century. The improvement of governance and the development of innovative mobility solutions will be crucial to ensure that the future of transport is cleaner and more equitable than its car-centred present.
    Keywords: road transport, mobility, connected vehicles, automated vehicles
    JEL: R00 R40 O18 L91 L62
    Date: 2019–06
  5. By: Genakos, Christos D.; Pagliero, Mario
    Abstract: We measure how pass-through varies with competition in isolated oligopolistic markets with captive consumers. Using daily pricing data from gas stations, we study how unanticipated and exogenous changes in excise duties (which vary across different petroleum products) are passed through to consumers in markets with different numbers of retailers. We find that pass-through increases from 0.44 in monopoly markets to 1 in markets with four or more competitors and remains constant thereafter. Moreover, the speed of price adjustment is about 60% higher in more competitive markets. Finally, we show that geographic market definitions based on arbitrary measures of distance across sellers, often used by researchers and policy makers, result in significant overestimation of the pass-through when the number of competitors is small.
    Keywords: Competition; gasoline; market structure; Pass-Through; Tax Incidence
    JEL: H22 L1
    Date: 2019–07
  6. By: Grant Allan (Department of Economics, University of Strathclyde); David Comerford (Department of Economics, University of Strathclyde); Kevin Connolly (qDepartment of Economics, University of Strathclyde); Peter McGregor (Department of Economics, University of Strathclyde); Andrew G Ross (Department of Economics, University of Strathclyde)
    Abstract: The continuing development of the offshore wind sector is an important element of UK energy and industrial policy since it holds the potential of substantial emissions reductions while simultaneously boosting economic activity. A central idea here is that the economic impact of the offshore wind sector can be enhanced by increasing the local content of its inputs. We explore, through simulation of a purpose-built Input-Output model of the UK, the economic and emissions impacts of the likely future development of the UK’s offshore wind sector, with a particular emphasis on the importance of local content. We explore six scenarios all of which embed the capacity expansion anticipated by the Sector Deal, but differ in terms of local content – including a set of illustrative simulations considering the possible impact of Brexit on local content. We find that future offshore wind development does indeed generate a “double dividend†in the form of simultaneous and substantial reductions in emissions and improvements in economic activity. It is also the case that, as anticipated, the scale of the economic stimulus arising from offshore wind development is directly and strongly related to the extent of local content.
    Keywords: low carbon economy, industrial strategy, supply chain, offshore wind, economic impact, Brexit
    JEL: Q40 Q43 Q54
    Date: 2019–08
  7. By: Katrina Jessoe; Maya Papineau; David S. Rapson
    Abstract: This paper quantifies a tenant-side “split incentives” problem that exists when the largest commercial sector customers are on electricity-included property lease contracts causing them to face a marginal electricity price of zero. We use exogenous variation in weather shocks to show that the largest firms on tenant-paid contracts use up to 14 percent less electricity in response to summer temperature fluctuations. The result is retrieved under weaker identifying assumptions than previous split incentives papers, and is robust when exposed to several opportunities to fail. The electricity reduction in response to temperature increases is likely to be a lower bound when generalized nationwide and suggests that policymakers should consider a sub-metering policy to expose the largest commercial tenants to the prevailing retail electricity price.
    Keywords: electricity, principal-agent problem, split incentive, contracts
    JEL: D22 L14 Q51
    Date: 2019
  8. By: Andreas Gerster; Michael Kramm
    Abstract: A growing literature has shown that behavioral biases influence consumer choices. Such so-called internalities are ubiquitous in many settings, including energy efficiency investments and the consumption of sin goods, such as cigarettes and sugar. In this paper, we use a mechanism design approach to characterize the optimal non-linear tax (or subsidy) for correcting behaviorally biased consumers. We demonstrate that market choices are informative about consumers’ bias, which can be exploited for benevolent price discrimination via a non-linear tax schedule. We derive that such “internality revelation” depends on two sufficient statistics: the correlation between valuations and biases, as well as the signal-to-noise ratio of the bias. Furthermore, we find that there must be a minimum alignment of preferences among the designer and the consumer to ensure internality tax implementability. We contrast our results with the insights from standard non-linear income taxation and discuss that the optimal corrective tax schedule is typically convex. In addition, we apply our findings to the light bulb market and determine the optimal non-linear subsidy for energy efficiency.
    Keywords: optimal commodity taxation, non-linear taxation, behavioral economics, public economics, internalities, environmental economics
    JEL: H21 D82 D04 Q58
    Date: 2019
  9. By: Martimort, David; Stole, Lars
    Abstract: Empirical evidence suggests that consumers facing complex nonlinear pricing often make choices based on average (not marginal) prices. Given such behavior, we characterize a monopolist's optimal nonlinear price schedule. In contrast to the textbook setting, nonlinear prices designed for ``average-price bias'' distort consumption downward for consumers at the top, may produce efficient consumption for consumers at the bottom, and typically feature quantity premia rather than quantity discounts. These properties arise because the bias replaces consumer information rents with curvature rents. Whether or not a monopolist prefers consumers with average-price bias depends upon underlying preferences and costs.
    Keywords: average-price bias; curvature rents; Nonlinear Pricing; price discrimination
    JEL: D82
    Date: 2019–07
  10. By: Doshi, Gaurav; Du, Sheldon
    Keywords: Resource/ Energy Economics and Policy
    Date: 2019–06–25
  11. By: Luana F. J. Swensson (IPC-IG)
    Abstract: "Inclusive public food procurement initiatives are relevant policy instruments to support smallholder farmers and their integration into formal markets. They are based on the premise that public institutions, when using their procurement power to award contracts, can go beyond the immediate scope of simply responding to the states procurement needs by addressing additional social, environment or economic policy goals. Their implementation, however, requires a conducive public procurement regulatory framework". (...)
    Keywords: Public, food, procurement, support, smallholder, farming, importance, conducive, regulatory, framework
    Date: 2018–12
  12. By: Grant Allan (Department of Economics, University of Strathclyde); Kevin Connolly (Department of Economics, University of Strathclyde); Peter McGregor (Department of Economics, University of Strathclyde); Andrew G Ross (Department of Economics, University of Strathclyde)
    Abstract: Given public investment in renewable energy technologies, it is important to understand the contribution these make to the economy. Various methods have been used to quantify impacts, such as job counts, surveys and measures based on economic statistics. Economic modelling approaches on the other hand appear to offer an ability to both provide metrics of interest to policy makers, and crucially an understanding of the activities which support that contribution. In this paper, we implement a “hypothetical extraction†of UK activities related to renewable electricity generation – specifically focusing on offshore wind – to identify the contribution that they make to economic activity as well as job quality, and emissions. Undertaking the partial extraction of offshore wind from an aggregated IO table, and then subsequently from one in which we have separated out the offshore wind electricity sector, we highlight the value of more disaggregation and technology-specific detail in economic accounts. We find that a significant portion of activity supported by offshore wind is supported by expansions in capacity, in addition to the operation of existing offshore wind activity, giving policymakers important information on the likely path of economic impacts related to renewable energy activities
    Keywords: low carbon economy, industrial strategy, supply chain, offshore wind, economic impact
    Date: 2019–08
  13. By: Ugis Sarma (Riga Technical University); Girts Karnitis (LU - University of Latvia); Janis Zuters (LU - University of Latvia); Edvins Karnitis (LU - University of Latvia)
    Abstract: During the decades the district heating's (DH) advantages (more cost-efficient heat generation and reduced air pollution) overcompensated the additional costs of transmission and distribution of the centrally produced thermal energy to consumers. Rapid increase in the efficiency of low-power heaters, development of separated low heat density areas in cities reduce the competitiveness of the large centralized DH systems in comparison with the distributed cluster-size networks and even local heating. Reduction of transmission costs, enhancement of the network efficiency by optimization of the design of the DH networks become a critical issue. The methodology for determination of the key drivers of the cost-efficiency of the DH networks to implement the most efficient (cost-minimal) thermal energy transmission was developed in this study. An inductive benchmarking modelling was applied; the general causal regularity is based on the observations of specific cases, thus determining the relationships between the network's design and thermal indicators as predictors and transmission costs as the target variable. The key drivers of the network efficiency were disclosed-the network length and the largest inner diameter of the pipes. The methodology is applicable for use by municipalities and heat providers for the heating planning of the new housing developments as well as renovation and/or expansion of the existing DH networks.
    Keywords: district heating,network design,data mining,benchmarking methodologies
    Date: 2019–09–30

This nep-reg issue is ©2019 by Natalia Fabra. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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