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on Regulation |
| By: | Pietzcker, Robert Carl; Osorio, Sebastian; Rodrigues, Renato |
| Abstract: | The EU Green Deal calls for climate neutrality by 2050 and 2030 emission reductions of 50-55% vs. 1990. Achieving these reductions requires a substantial tightening of the EU emissions trading system (EU-ETS). This paper explores how the power sector would have to change in reaction to a tighter EU ETS target, and analyses the technological and economic implications. To cover the major ETS sectors, we combine a detailed power sector model with a marginal-abatement cost curve representation of industry emission abatement. We find that tightening the target would speed up the transformation by 3-15 years for different parts of the electricity system, with renewables contributing two-thirds of the electricity in 2030, EU-wide coal use almost completely phased-out by 2035 instead of 2050, and zero electricity generation emissions reached by 2050. Carbon prices within the EU ETS would more than double to 60€/tCO2 in 2030, reducing cumulated power sector emissions from 2020-2055 by 45% compared to a scenario with the current target. This transformation would come at limited costs: total discounted power system costs would only increase by 5%. We test our findings against a number of sensitivities: increased electricity demand, which might arise from sector coupling, increases deployment of wind and solar and prolongs gas usage. Not allowing transmission expansion beyond 2020 levels shifts investments from wind to PV, hydrogen and batteries, and increases total system costs by 3%. Finally, unavailability of fossil carbon capture and storage (CCS) or further nuclear investments does not impact results, while unavailability of bioenergy-based CCS (BECCS) has a small impact (3%) on emissions. |
| Keywords: | Power sector decarbonization,EU Emission Trading System (ETS),European Green Deal,Renewable Energy,Carbon capture and storage (CCS),Electricity Sector |
| JEL: | Q4 C61 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:222579&r=all |
| By: | L. (Lisa B.) Ryan; Ewa Lazarczyk; Guneet Kaur |
| Abstract: | Electricity market design is evolving with the increase in electricity generated from renewable sources. The market system was originally designed for dispatchable fossil fuel electricity generation with high marginal costs rather than renewable electricity generation with nearly zero marginal costs and high upfront capital costs. When short term prices no longer cover long term investment costs, new market design is needed. An alternative is to increase interconnection to facilitate increased trade between markets (Pollitt and Chyong, 2018). Economic theory would suggest that eliminating barriers to trade across a regional market will decrease consumer costs and producer profits in areas that increase imports, while increasing producer profits and consumer costs in areas that increase exports (Dahlke, 2018). Trade through interconnectors can exploit differences in wind and sun conditions across regions and so reduce supply variability; higher shares of renewable electricity raises the value of market integration even further (Newbery et al., 2018). In this context, the EU has been progressively harmonizing national and regional electricity markets, to form a single market that includes more than 500 million people. The Multi-Regional Coupling organized through European power exchanges coordinates the clearing of day-ahead markets and determines day-ahead prices across the countries involved (Politico, 2018). In the 1996, 2003 and 2009 EU electricity directives, the development of integrated wholesale power markets across the continent was encouraged in order to incentivise market-driven investment in generation across Europe. The Internal Energy Market (IEM) in Europe provides for free trade across border and non-discrimination between internal and cross-border transactions. On October 1st 2018, Ireland was one of the final countries to integrate with this market due to the small isolated nature of this synchronous system which required additional precautions to put in place new market arrangements. The Irish electricity market has been a wholesale all-island market (including Northern Ireland, called the SEM) since 2007. The integration of the all-island electricity market with European electricity markets was expected to increase the use of the interconnector with Great Britain which should “deliver increased levels of competition which should help put a downward pressure on prices as well as encouraging greater levels of security of supply and transparency” (EirGrid, 2016). In addition to integration with Europe, other features were included in the new I-SEM market, such as changes to how energy is bought and sold; how generators are remunerated for availability; forward trading arrangements and market liquidity; market power controls; and the systems, policies and procedures that are required to operate the market (EirGrid, 2016). This has led to new balancing, capacity, and intraday markets that did not previously exist in the Irish market. With the integration of the Irish market, the IEM now comprises 20 countries, with 38 interconnectors and a total generating capacity of over 3,000 TW (EirGrid, 2016). The European Target model sets out the common rules and arrangements for market coupling in Europe. It includes a common price coupling algorithm for scheduling day-ahead markets and determining flows between geographic regions. The energy transactions involving sellers and buyers from different bidding zones are centrally collected to maximise the most efficient and effective trades. In theory, unless the network is congested, markets should converge to a single price. When the network is congested, prices diverge. The integration of the Irish electricity market with the IEM provides a natural experiment with which to test economic theory relating to the benefits of interconnection, regional electricity trade, and market rule changes for consumers,producers and markets. While there is an extensive literature on electricity market design and theory, it is rare to find empirical data such as this with which to test the theory. This integration is relatively recent, yet it provides an ideal opportunity to examine in detail several features over the period directly before and after the change. Ireland, as an isolated market. Ireland has been identified as a country at the forefront of market change due to the high share of renewable electricity and its isolated market (Polllitt and Chyong, 2018). It also serves as a good case study, as there are less confounding factors in an analysis of market design, compared with more geographically integrated countries. |
| Keywords: | Electricity markets; SEM; I-SEM; Price volatility; Interconnections |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:oapubs:10197/11468&r=all |
| By: | Keeley, Alexander Ryota; Matsumoto, Ken'ichi; Tanaka, Kenta; Sugiawan, Yogi; Managi, Shunsuke |
| Abstract: | This study combines regression analysis with machine learning analysis to study the merit order effect of renewable energy focusing on German market, the largest market in Europe with high renewable energy penetration. The results show that electricity from wind and solar sources reduced the spot market price by 9.64 €/MWh on average during the period from 2010 to 2017. Wind had a relatively stable impact across the day, ranging from 5.88 €/MWh to 8.04 €/MWh, while the solar energy impact varied greatly across different hours, ranging from 0.24 €/MWh to 11.78 €/MWh and having a stronger impact than wind during peak hours. The results also show characteristics of the interactions between renewable energy and spot market prices, including the slightly diminishing merit order effect of renewable energy at high generation volumes. Finally, a scenario-based analysis illustrates how different proportions of wind and solar energies affect the spot market price. |
| Keywords: | Renewable energy sources, Electricity spot price, Intermittency, Merit order effect, Boosting. |
| JEL: | Q41 Q42 Q47 Q56 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102314&r=all |
| By: | Timilsina,Govinda R. |
| Abstract: | The levelized cost of electricity is the most common indicator used to compare the cost competitiveness of electricity-generating technologies. Several studies claim that some renewable energy technologies, particularly utility-scale solar photovoltaic and onshore wind, are cost-competitive with fossil fuel?based technologies. However, there is no consensus on this point considering the wide variations in factors that influence the levelized costs of electricity across countries and technologies. This study calculates more than 4,000 levelized costs of electricity for 11 technologies, varying key input variables. The study shows that the levelized costs of electricity for renewable electricity technologies, except concentrated solar and offshore wind, are lower than those for fossil fuel?based technologies at the lower range of capital costs and discount rates of 10 percent or lower. However, for a reasonable range of input variables, calculations of the levelized costs of electricity for renewables based on reasonable parameter values do not justify the low auction prices for solar power, below US$20 per megawatt hour, recently observed in some parts of the world. The study also highlights the shortcomings of the levelized cost indicator for comparing the cost-competitiveness of different types of electricity generation technologies. |
| Date: | 2020–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9303&r=all |
| By: | Isaac, Raphael S |
| Abstract: | The last century brought a shift in rail propulsion from the (typically) coal-powered steam engine to a combination of the diesel-electric locomotive and the electrified locomotive running under electrified overhead lines. While, no doubt, an advance over the earlier technology, the two incumbent technologies are not without their shortcomings. In the current era, rapid technological developments and increased concerns about climate change have also spurred interest away from the internal combustion engine and the use of fossil fuels in various applications. These same technologies hold promise in a rail context, a mode of transportation that relies on a smaller number of more centralized operators. With the tremendous investment of time, cost, and other resources that can go into a pilot experiment of a fuel technology and, often, related regulatory processes, it makes sense to determine the key candidates for such pilots. A major goal of this work is to help industry and government narrow down the key technologies, in terms of cost, viability, and environmental impacts, and simultaneously identify the challenges that may be encountered by a given technology that otherwise appears to hold significant promise. This study focuses on a U.S. context, and on the period between 2022 and 2038. Passenger and freight rail routes and systems were examined, each with different characteristics, via simulations of a single rail trip, A general environmental analysis was also performed on freight switcher locomotive activity. The fuels examined included diesel, natural gas, Fischer-Tropsch diesel, hydrogen, and, in a passenger rail and switcher context, diesel and hydrogen powertrains paired with batteries to take in regenerative braking energy. The study finds cost reductions with both natural gas and (natural gas-derived) Fischer-Tropsch diesel, but with limited environmental benefits. Hydrogen via fuel cell has significant promise to reduce GHG and criteria pollutant emissions. That technology’s costs, both fuel and equipment, are highly uncertain; however, the study finds that, with lower bound projected costs, it could be competitive with diesel-electric costs; in the case of passenger rail, hybridization with batteries is also compelling. Hybridized hydrogen also was found to demonstrate a clear environmental benefit in switcher locomotive applications. |
| Keywords: | Engineering, Physical Sciences and Mathematics, fuel, passenger rail, freight rail, hydrogen |
| Date: | 2020–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:itsdav:qt3wt0n8tx&r=all |
| By: | Mathieu Marcoux (Université de Montréal, CIREQ) |
| Abstract: | To shed light on the limited success of competition enhancing policies in mobile telecommunications, I estimate a game of transceivers’ locations between national incumbents and a new entrant in Canada. I recover player-specific unobserved heterogeneity from bids for spectrum licenses to address the unavailability of regressors required to identify incumbents’ responses to the new entrant’s decisions. I find that incumbents benefitting from important economies of density is a plausible explanation for policies’ drawbacks. I then evaluate the equilibrium effect of subsidizing the new entrant’s transceivers and find that this alternative proposition increases its investments while only slightly modifying incumbents. |
| Keywords: | multiple equilibria, unobserved heterogeneity, empirical games, telecommunications |
| JEL: | C57 L11 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:mtl:montec:01-2019&r=all |
| By: | Timilsina,Govinda R.; Deluque Curiel,Ilka Fabiana |
| Abstract: | This study analyzes impacts on the power sector in the Middle East and North Africa region of three policies: removal of fuel subsidies, cross-border electricity trade, and reduction of carbon dioxide emissions in line with commitments under the Paris Agreement. The analysis uses a power system planning model that minimizes the total electricity supply cost over 2018?35 by satisfying specified technical, economic, environmental, and policy constraints. The study shows that the region would save between US$26.3 billion and US$27.5 billion, measured in 2018 prices, by removing subsidies of natural gas used for power generation. It would save US$83.6 billion to US$90.9 billion through cross-border electricity trade. The two policies together would yield a reduction of 10 percent in cumulative power sector carbon dioxide emissions in the region, with a net cost savings of US$111 billion. If a carbon constraining policy is considered to achieve the same level of reduction of emissions, the cost of the power system would increase by US$97 billion. The study also reveals that the benefits of subsidy removal would be higher in the presence of cross-border trade, and the benefits of cross-border trade would be higher in the absence of fuel subsidies. |
| Keywords: | International Trade and Trade Rules,Energy Policies&Economics,Energy and Environment,Energy Demand,Energy and Mining,Oil Refining&Gas Industry,Power&Energy Conversion |
| Date: | 2020–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9297&r=all |
| By: | Nilsson, Jan-Eric (Research Programme in Transport Economics); Odolinski, Kristofer (Research Programme in Transport Economics) |
| Abstract: | This paper provides empirical evidence on the optimal timing of rail infrastructure renewal. Using an econometric approach on data from the Swedish railway network, we establish a relationship between cumulative tonnes and maintenance costs, as well as between cumulative tonnes and infrastructure failures that cause train delays. Together with average values on delay hours per failure and assumptions on passengers per train, we perform example calculations on the optimal timing for a track renewal. This timing will depend on the case considered, such as whether traffic intensity is high or low. Empirical evidence on the relationship between line capacity utilisation and delay time can provide more robust estimates for the different cases considered by an infrastructure manager. Still, the results in this paper is a significant step towards a usable cost-benefit analysis model for the timing of rail infrastructure renewals. |
| Keywords: | Railway; Infrastructure; Optimization; Renewal; Maintenance; Train Delays |
| JEL: | H54 L92 R49 |
| Date: | 2020–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:trnspr:2020_004&r=all |
| By: | Genakos, C.; Grey, F.; Ritz, R. |
| Abstract: | Economic policy and shifts in input market prices often have significant effects on the marginal costs of firms and can prompt strategic responses that make their impact hard to predict. We introduce “generalized linear competition” (GLC), a new model that nests many existing theories of imperfect competition. We show how firm-level cost pass-through is a sufficient statistic to calculate the impact of a cost shift on an individual firm’s profits. GLC sidesteps estimation of a demand system and requires no assumptions about the mode of competition, rivals’ technologies and strategies, or “equilibrium”. In an empirical application to the US airline market, we demonstrate GLC’s usefulness for ex ante policy evaluation and identify the winners and losers of climate-change policy. We also show how GLC’s structure, under additional assumptions, can be used for welfare analysis and to endogenize the extent of regulation. |
| Keywords: | Pass-through, imperfect competition, regulation, carbon pricing, airlines, political economy |
| JEL: | D43 H23 L51 L93 |
| Date: | 2020–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2078&r=all |
| By: | Henningsen, Geraldine; Wiese, Catharina |
| Abstract: | Most environmental policies that aim to encourage households to invest in more climate- friendly technologies and retrofits, e.g., solar panels, electric cars, or attic insulation, are broadly targeted and do not take households’ individual investment behaviour into account. Scholars have, therefore, emphasised the need to account for household heterogeneity in policy design in order to ensure effective and efficient policy outcomes. However, such a policy design requires the existence of easily accessible household characteristics, which can reliably and consistently explain households’ investment behaviour in a variety of investment scenarios. Using the vast empirical literature on the determinants of households’ investments in energy-efficient home improvements as a case study, we conduct a meta-analysis to (i) determine the magnitude of the effects of easily accessible household characteristics, and; (ii) test the stability of these effects under a variety of circumstances. We integrate the empirical results from 63 publications that investigate the impact of socio-economic characteristics on households’ energy-efficiency investments and examine potential model- and sample-specific factors to explain the variation in the estimated effects. Our findings for the household characteristics: income, age, education, household size, and homeownership, show that significant effects only exist for some of these characteristics, with income and homeownership showing the greatest impact. Furthermore, the results confirm a strong situational component in the effect of these household characteristics on households’ investment decisions, which challenges the practicality of tailored policy design. |
| Keywords: | Household heterogeneity, Environmental policy, Climate, Meta analysis |
| JEL: | D10 D11 D12 Q40 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:101701&r=all |
| By: | Alberini,Anna; Steinbuks,Jevgenijs; Timilsina,Govinda R. |
| Abstract: | This study uses a contingent valuation approach to value the willingness-to-pay (WTP) for improved service experienced by households in Nepal following the end of the country's load-shedding crisis of 2008-2016. Using a detailed survey of grid-connected Nepali households, the authors calculate the WTP per outage-day avoided and the residential value of lost (VoLL) and analyze their key drivers. Households are willing to pay, on average, 123.32 NR ($1.11) per month, or 65 percent of the actual average monthly bill for improved quality of power supply. The preferred estimates of the VoLL are in the range of 5 to 15 NR/kWh (¢4.7-¢14/kWh). These estimates are below the marginal cost of avoided load shedding, and virtually the same as valuations at the beginning of the load-shedding crisis. |
| Date: | 2020–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9311&r=all |
| By: | Suyunchev, Marat (Суюнчев, Марат) (The Russian Presidential Academy of National Economy and Public Administration); Mozgovaya, Oksana (Мозговая, Оксана) (The Russian Presidential Academy of National Economy and Public Administration); Kuznetsov, Vasiliy (Кузнецов, Василий) (The Russian Presidential Academy of National Economy and Public Administration) |
| Abstract: | This paper abstracts the results of research scientific work "The tariff effects research of comparative method for default electricity supplier’s regulation", preconditions and the results of the transition to implementation of a comparative method at retail markups establishment to the default electricity suppliers have been investigated. In particular, it is been assessed as the application of the comparative method affected the growth of retail markups of default electricity suppliers, prices of electric energy for ultimate customers and financial position of the default electricity suppliers. According to the results of the research the main problems associated with the transition to the comparative method in activity regulation of default electricity suppliers have been revealed, and practical recommendations for improving the methodology of activity regulation of default electricity suppliers using the comparative method (yardstick costs) have been established. |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:wpaper:052012&r=all |
| By: | Pejman Bahramian (Department of Economics, Queen’s University, Kingston, Canada); Glenn P. Jenkins (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus); Frank Milne (Department of Economics, Queen’s University, Kingston, Canada) |
| Abstract: | The displacement impacts of wind power generation on other generation technologies are estimated for Ontario. In addition, their annual financial benefits, costs, and international stakeholder impacts are measured. For every 100 MWh generated, almost 53 MWh of gas output and 23 MWh of hydro output is displaced, and 19 MWh of power is exported. Ontario loses 826.42 million USD annually from having wind power generation in the system, while the US gains 7.50 million USD through electricity exported from Ontario. Wind power generation has produced an estimated 108.98 million USD in reducing CO2 emissions in the US and Ontario through displacing thermal generation. Comparing the environmental benefits with the net cost to consumers shows the promotion of wind power generation to be largely a waste of Ontario’s resources. |
| Keywords: | wind power, thermal displacement, CO2 emissions, stakeholder analysis |
| JEL: | O10 Q48 |
| Date: | 2020–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:qed:dpaper:4563&r=all |
| By: | Joseph E. Aldy; Matthew Kotchen; Mary F. Evans; Meredith Fowlie; Arik Levinson; Karen Palmer |
| Abstract: | This paper considers the treatment of co-benefits in benefit-cost analysis of federal air quality regulations. Using a comprehensive data set on all major Clean Air Act rules issued by the Environmental Protection Agency over the period 1997-2019, we show that (1) co-benefits make up a significant share of the monetized benefits; (2) among the categories of co-benefits, those associated with reductions in fine particulate matter are the most significant; and (3) co-benefits have been pivotal to the quantified net benefit calculation in exactly half of cases. Motivated by these trends, we develop a simple conceptual framework that illustrates a critical point: co-benefits are simply a semantic category of benefits that should be included in benefit-cost analyses. We also address common concerns about whether the inclusion of co-benefits is problematic because of alternative regulatory approaches that may be more cost-effective and the possibility for double counting. |
| JEL: | D61 Q53 Q58 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27603&r=all |
| By: | Fulton, Lewis; Compostella, Junia; Kothawala, Alimurtaza |
| Abstract: | UC Davis researchers have developed a cost model of travel choices that individuals make related to urban vehicle travel. These choices can include deciding to own, ride in, and drive a private vehicle or use pooled or solo ridesourcing (e.g., Uber). The model considers both monetary and non-monetary factors that affect travel choice. Monetary factors include the costs of purchasing, maintaining, and fueling different types of privately owned vehicles; and the cost of using ridesourcing services. Non-monetary (or “hedonic”) factors include travel time, parking time/inconvenience, willingness to drive or be a passenger in a driven or automated vehicle, and willingness to travel with strangers. The travel choices affected by these factors impact broader society through traffic congestion, pollution, greenhouse gas emissions, accidents, etc. and thus may be an important focus of policy. This report reviews recent literature, considers factors affecting travel choices, and reports, on a conjoint pilot survey or stated preferences. Finally, it considers approaches to apply time value to factors that are not typically associated with specific trips, such as time spent on vehicle maintenance and parking. The results should enable a deeper understanding of the likelihood that individuals will own and use private vehicles or use shared (solo and pooled) ridesourcing, and how automated vehicle services could affect these choices in the future. The study also highlights additional research needs, such as a large scale stated preference study covering more factors than have been included in previous studies. View the NCST Project Webpage |
| Keywords: | Social and Behavioral Sciences, Travel costs, value of time, mode choice, cost estimating, hedonic costs, non-monetary costs |
| Date: | 2020–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:itsdav:qt8tc6v0b5&r=all |
| By: | Ioannou, Petros; Giuliano, Genevieve; Dessouky, Maged; Chen, Pengfei; Dexter, Sue |
| Abstract: | International trade continues to increase, with container trade growing at a 9.5% annual rate worldwide and at a 6% annual rate in the United States. Container ships are also getting bigger to meet this growing demand. As a result, cargo is concentrated into the largest ports, which intensifies bottlenecks on the road networks surrounding these ports. Thus, logistics companies are faced with increasing complexity in their operations and increasing traffic congestion that adds costs, as well as greenhouse gas emissions and local air pollution. The transition to zero emission truck technology could add further complexity, requiring companies to plan for electric trucks’ shorter ranges and longer refueling times. Researchers at the University of Southern California developed a centrally coordinated freight routing system and ran several simulations to minimize the social costs of freight transportation, also accounting for adoption of electric trucks. The researchers also interviewed several individuals with responsibility for trucking operations in the Los Angeles region to better understand the implementation issues of a centrally coordinated freight routing system. This policy brief summarizes the findings from that research and provides policy implications. View the NCST Project Webpage |
| Keywords: | Engineering, Alternate fuels, Electric vehicle charging, Electric vehicles, Fleet management, Freight traffic, Routing, Trucks, Zero emission vehicles |
| Date: | 2020–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:itsdav:qt1m62h1dd&r=all |