nep-reg New Economics Papers
on Regulation
Issue of 2021‒03‒08
twenty papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Renewable Energy Zones in Australia’s National Electricity Market By Simshauser, P.
  2. Optimal regulatory policies for charging of electric vehicles By Mads Greaker
  3. Diffusion and system impact of residential battery storage under different regulatory settings By Fett, Daniel; Fraunholz, Christoph; Keles, Dogan
  4. Raising Truck Speed Limits in California Could Increase Mobility But May Also Increase Crashes By Zhang, Michael PhD; Musabbir, Sarder Rafee
  5. Climate Mitigation Policy in Denmark: A Prototype for Other Countries By Nicoletta Batini; Ian Parry; Philippe Wingender
  6. Designing Conditional Schemes for Green Industrial Policy under Different Information Structures By Guy Meunier; Jean-Pierre Ponssard
  7. Climate solidarity, green trade unions and timing of technological choice By Asproudis, Elias; Filippiadis, Eleftherios; Tian, Mo
  8. Drive less, drive better, or both? Behavioral adjustments to fuel price changes in Germany By Alberini, Anna; Horvath, Marco; Vance, Colin
  9. Information campaigns for residential energy conservation By Andor, Mark Andreas; Gerster, Andreas; Peters, Jörg
  10. Managing intermittency in the electricity market By Jean-Henry Ferrasse; Nandeeta Neerunjun; Hubert Stahn
  11. Hold the line: The evolution of telecommunications provisions in regional trade agreements By Monteiro, José-Antonio
  12. Joint bidding and horizontal subcontracting By BOUCKAERT, Jan; VAN MOER, Geert
  13. The Impact of Regulation on Innovation By Philippe Aghion; Antonin Bergeaud; John Van Reenen
  14. User Perceptions of the Risks of Electric, Shared, and Automated Vehicles Remain Largely Unexplored By Kurani, Kenneth S.
  15. A Retrospective Study of State Aid Control in the German Broadband Market By Tomaso Duso; Mattia Nardotto; Jo Seldeslachts
  16. Contractual Rigidity and Political Contestability: Revisiting Public Contract Renegotiations By Jean Beuve; Marian W. Moszoro; Pablo T. Spiller
  17. The cost of uncoupling GB interconnectors By Guo, B.; Newbery, D.
  18. Operationalizing eco-social policies: a mapping of energy poverty measures in EU member states By Laure-Anne Plumhans
  19. Strategic Planning of Public Charging Infrastructure By Günther, Maik; Fallahnejad, Mostafa
  20. The role of energy providers in tackling energy poverty By Constanze Fettnig

  1. By: Simshauser, P.
    Abstract: Australia’s National Electricity Market operates in one of the world’s longest and stringiest transmission networks. The 2016-2020 investment supercycle, in which 13,000 MW of renewables were committed, is slowly revealing the limits of network hosting capacity for renewable plant. In this article, side-effects arising from the supercycle are analysed. The majority sources of renewable investment failure relate to deteriorating system strength, viz. associated connection lags, remediation and curtailment costs. Although a multi-zonal market, the NEMs locational investment signals remain visibly strong. A change to nodal arrangements may refine dispatch efficiency but the bigger policy problem is rapidly diminishing network hosting capacity for new renewables, imperfect regulation and regulatory lag associated with augmentation. Markets participants seek to move faster than regulatory frameworks allow. Renewable Energy Zones (REZ) are examined through both i). a consumer-funded regulatory model and ii). a renewable generator-funded market model. A ‘super-sized concessional mezzanine’ facility is presented as a critical element of REZ capital funding. It forms the means by which to optimise market-based REZ transmission augmentation and moderate sponsor risks of transient underutilisation.
    Keywords: Electricity, Renewable Energy Zones, transmission investment, locational investment signals
    JEL: D25 D80 G32 L51 Q41
    Date: 2021–03–03
  2. By: Mads Greaker (Oslo Business School - OsloMet)
    Abstract: Electric vehicles (EVs) and their associated charging stations are characterized by indirect network effects. Indirect network effects may imply too slow adoption of a new good that improves welfare. Today, there are at four standards for high-speed charging in Europe. We find that policies should seek to standardize high-speed charging systems as this will unambiguously mean faster phase-in of EVs and improve welfare. We also find that governments should subsidize both the charging at each station and the entry of charging stations. The subsidies should cover a share of the private variable charging cost and the private fixed entry cost. Furthermore, the formula for setting the shares of costs to be paid by the regulator turns out to be very simple; the regulator only has to observe the percentage markup on the charging price, and can calculate the optimal share directly from that.
    Keywords: EV policy, indirect network effects, EV charging
    Date: 2020–10–30
  3. By: Fett, Daniel; Fraunholz, Christoph; Keles, Dogan
    Abstract: Cost reductions of rooftop photovoltaics and battery storage, increasing retail electricity prices as well as falling feed-in remuneration provide strong incentives for many German households to engage in self-consumption. These developments may also affect the electricity system as a whole. Against this background, we jointly apply a prosumer simulation and an agent-based electricity market simulation in order to investigate the long-term impacts of a residential battery storage diffusion on the electricity market. We analyze different regulatory frameworks and find significant effects on the household level, yet only moderate system impacts. In the long run, the diffusion of residential battery storage seems difficult to govern, even under a restrictive regulation. In contrast, the way the batteries are operated may be easier to regulate. Policymakers and regulators should focus on this aspect, since a system-friendly battery operation supports the system integration of residential photovoltaics while having little impact on the households' selfsufficiency.
    Keywords: Self-consumption,Battery storage,Technology diffusion,Electricity system,Agent-based simulation,Model coupling
    Date: 2021
  4. By: Zhang, Michael PhD; Musabbir, Sarder Rafee
    Abstract: Highway speed limits inherently represent a tradeoff between safety and mobility. While higher speed limits shorten travel times and foster economic benefits (especially for the trucking and logistics industries), they can also increase the likelihood and severity of crashes, as higher vehicle speeds require longer stopping distances and generate more energy during a collision. Highway speed limits are increasing nationwide. While there is no consensus on the optimal speed limit (Figure 1), research generally shows that lower speed limits reduce the frequency and severity of crashes. Likewise, there is mixed evidence on whether a universal speed limit (trucks and passenger vehicles subject to the same speed limit) or a differential speed limit (trucks subject to a lower speed limit than passenger vehicles) is safer. While some evidence indicates that setting lower speed limits for heavier trucks that are slow to stop has safety benefits, other research suggests that differential speed limits create bottlenecks that may actually cause more crashes as cars attempt to overtake slower trucks. California is one of only seven states that set differential speed limits.
    Keywords: Engineering
    Date: 2021–02–01
  5. By: Nicoletta Batini; Ian Parry; Philippe Wingender
    Abstract: Denmark has a highly ambitious goal of reducing greenhouse gas emissions 70 percent below 1990 levels by 2030. While there is general agreement that carbon pricing should be the centerpiece of Denmark’s mitigation strategy, pricing needs to be effective, address equity and leakage concerns, and be reinforced by additional measures at the sectoral level. The strategy Denmark develops can be a good prototype for others to follow. This paper discusses mechanisms to scale up domestic carbon pricing, compensate households, and possibly combine pricing with a border carbon adjustment. It also recommends the use of revenue-neutral feebate schemes to strengthen mitigation incentives, particularly for transportation and agriculture, fisheries and forestry, though these schemes could also be applied more widely.
    Keywords: climate change, Denmark climate mitigation, carbon pricing, feebate, revenue recycling, border carbon adjustment, transportation, agriculture
    JEL: Q48 Q54 Q58 H23
    Date: 2021
  6. By: Guy Meunier; Jean-Pierre Ponssard
    Abstract: We assume that a project requires an initial outlay and may either succeed or fail. The probability of success depends on its type and on the effort of the firm. Only in the case of success do private and external benefits appear. The paper analyzes the optimal design of subsidies under different information structures the state agency and the firm may have over the characteristics of the project. It is proved that under symmetric information structures rewarding success is optimal while, ordinarily, under asymmetric ones, rewarding failure is optimal. While reward success encourages effort, rewarding failure mitigates windfall profit. In asymmetric structures, the second feature dominates. These results emphasize the crucial significance of properly identifying the underlying structure in designing an efficient incentive scheme. The policy relevance of our analysis is discussed in the context of risky programs such as those for the energy transition associated with COVID recovery plans.
    Keywords: green innovation, public financing, information structure, conditional schemes
    JEL: O38 D25 D82 H25
    Date: 2021
  7. By: Asproudis, Elias; Filippiadis, Eleftherios; Tian, Mo
    Abstract: We consider a Cournot duopoly consisting of two geographically separated firms, each associated with a local environmental-friendly trade union that exhibits climate solidarity. In the basic model, firms choose abatement technologies prior to bargaining over wages and employment with the unions. We show that the trade unions would lower the wage with the degree of reciprocal solidarity, providing additional incentives for firms to adopt greener technology and hence improving the social welfare. In the alternative model where trade unions decide the wages prior to the firms’ abatement and employment decisions, the firms always choose the dirtiest available technology while output will increase with the degree of solidarity. These results suggest that establishing the social norm and practice of reciprocal solidarity across trade unions in appropriate manner will help the internalisation of global environmental issues, which could mitigate the global regulation difficulties that require strong cross-border coordination among governments.
    Keywords: green trade unions, reciprocity, climate solidarity, emissions, environmental technology
    JEL: Q5
    Date: 2021
  8. By: Alberini, Anna; Horvath, Marco; Vance, Colin
    Abstract: The demand for motor fuel should decline when its price rises, but how exactly does that happen? Do people drive less, do they drive more carefully to conserve fuel, or do they do both? To answer these questions, we use data from the German Mobility Panel from 2004 to 2019, taking advantage of the fluctuations in motor fuel prices over time and across locales to see how they affect Vehicle Kilometers Traveled (VKT) and on-road fuel economy (expressed in kilometers per liter). Our reduced-form regressions show that while the VKTs driven by gasoline cars decrease when the price of gasoline rises, their fuel economy tends to get worse. It is unclear why this happens. Perhaps attempts to save on gasoline-cutting on solo driving, forgoing long trips on the highway, driving more in the city-end up compromising the fuel economy. By contrast, both the VKTs and the fuel economy of diesel cars appear to be insensitive to changes in the price of diesel. Latent class models confirm our main findings, including the fact that while fuel prices, car attributes, and household and location characteristics explain much of the variation in the VKTs, it remains difficult to capture the determinants of on-road fuel economy. Since the price elasticity of fuel consumption is the difference between the price elasticity of VKT and the price elasticity of the fuel economy, our results suggest that the fuel economy might be the "weakest link" of price-based policies that seek to address environmental externalities, such as a carbon tax.
    Keywords: On-Road fuel economy,price elasticity,vehicle kilometers traveled,motor fuel prices
    JEL: Q41 Q53 Q54 R41
    Date: 2021
  9. By: Andor, Mark Andreas; Gerster, Andreas; Peters, Jörg
    Abstract: This paper evaluates an intervention that randomized information letters about energy efficient investments and behaviors among 120,000 customers of two utilities in Germany. We find that conservation effects differ considerably between both utilities, ranging from a precisely estimated zero effect to 1.4%. By contrast, we do not detect significant framing effects from presenting savings in monetary or ecological terms. Based on random causal forest methods, we show that the effect heterogeneity across utilities cannot be explained by socio-demographic characteristics. Our results demonstrate the importance of site-specific factors for the effectiveness of information campaigns, which has crucial implications for targeting and the ability to infer population-wide effect sizes from pilot studies.
    Keywords: Imperfect information,information letters,behavioral public economics,energy efficiency,energy conservation,non-price interventions,targeting
    JEL: D12 D83 L94 Q41
    Date: 2020
  10. By: Jean-Henry Ferrasse (Aix-Marseille Univ, CNRS, M2P2, Marseille, France); Nandeeta Neerunjun (Aix-Marseille Univ, CNRS, AMSE and M2P2, Marseille, France); Hubert Stahn (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.)
    Abstract: We analyze the integration of intermittent renewables-based technologies into an electricity mix comprising of conventional energy. Intermittency is modeled by a contingent electricity market and we introduce demand-side flexibility through the retailing structure. Retailers propose diversified electricity contracts at different prices allowing consumers to choose their optimal electricity consumption. These contracts are modeled by a set of state-contingent electricity delivery contracts. We show existence and uniqueness of a competitive equilibrium of the contingent wholesale and retail markets. We provide a welfare analysis and only obtain constraint efficiency due to a limited number of delivery contracts. Finally, we discuss the conditions under which changing the set of delivery contracts improves penetration of renewables and increases welfare. This provides useful policy insights for managing intermittency and achieving renewable capacity objectives.
    Keywords: electricity market, renewables, intermittency, demand exibility
    JEL: Q41 Q42 D61 G13
    Date: 2021–03
  11. By: Monteiro, José-Antonio
    Abstract: Based on the first comprehensive mapping of telecommunications provisions telecommunications in regional trade agreements (RTAs), this paper shows that telecommunications provisions in RTAs have evolved and expanded significantly over the years. While some provisions focus on information and communications technologies (ICT) infrastructure, policy and investment, other provisions address telecommunications services as well as standards and conformity assessment procedures of ICT equipment. The most detailed and comprehensive telecommunications provisions are found in stand-alone chapters, sections or annexes on telecommunications services. A network analysis further reveals that telecommunications provisions remain highly heterogenous. Only a limited number of, mostly advanced economies, tend to negotiate very detailed and comprehensive provisions on telecommunications in their respective RTAs. While many telecommunications provisions found in RTAs draw on existing WTO rules, including the Annex on Telecommunications to the General Agreement on Trade in Services (GATS), some GATS provisions, the Reference Paper on Regulatory Principles on Basic Telecommunications and the Agreement on Technical Barriers to Trade, an increasing number of RTAs incorporate explicit provisions that expand existing WTO disciplines and address new regulatory topics related to telecommunications services, such as international roaming, net neutrality, and stolen or lost mobile terminal equipment.
    Keywords: World Trade Organization,Regional Trade Agreements,Telecommunications,Digitaleconomy,Network Analysis
    JEL: F13 F15
    Date: 2021
  12. By: BOUCKAERT, Jan; VAN MOER, Geert
    Abstract: This paper investigates joint bidding when firms have incentives to sign subcontracts with each other after competing in the bidding stage. A bidding consortium affects the horizontal subcontracting market and, through backward induction, alters firms’ bids. Our findings challenge the current legal practice that consortia without efficiencies must pass the “no-solo-bidding test”, requiring that its members could not bid stand-alone. Our framework predicts that the formation of a temporary consortium, which has the feature that it dissolves after submitting a losing bid, benefits the procurer. The winning bid is more competitive with a temporary as compared to a structural consortium.
    Keywords: Joint bidding, Horizontal subcontracting, buyer power
    JEL: D43 L13 L14 L41
    Date: 2021–02
  13. By: Philippe Aghion; Antonin Bergeaud; John Van Reenen
    Abstract: Does regulation affect the pace and nature of innovation and if so, by how much? We build a tractable and quantifiable endogenous growth model with size-contingent regulations. We apply this to population administrative firm panel data from France, where many labour regulations apply to firms with 50 or more employees. Nonparametrically, we find that there is a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Further, a dynamic analysis shows a sharp reduction in the firm's innovation response to exogenous demand shocks for firms just below the regulatory threshold. We then quantitatively fit the parameters of the model to the data, finding that innovation at the macro level is about 5.4% lower due to the regulation, a 2.2% consumption equivalent welfare loss. Four-fifths of this loss is due to lower innovation intensity per firm rather than just a misallocation towards smaller firms and lower entry. We generalize the theory to allow for changes in the direction of R&D, and find that regulation's negative effects only matter for incremental innovation (as measured by citations and text-based measures of novelty). A more regulated economy may have less innovation, but when firms do innovate they tend to “swing for the fence” with more radical (and labour saving) breakthroughs.
    Keywords: Innovation, regulation, patents, firm size.
    JEL: O31 L11 L51 J8 L25
    Date: 2021
  14. By: Kurani, Kenneth S.
    Abstract: Advocates of electric, shared, and automated vehicles (e-SAVs) envision a future in which people no longer need to drive their privately owned, petroleum-fueled vehicles. Instead, for daily travel they rely on fleets of electric, automated vehicles that offer travel services, including the option to share, or “pool,” rides with strangers. The design, deployment, and operation of e-SAVs will require widespread willingness of users to share with strangers vehicles that are capable of fully automated driving. To achieve the environmental and societal goals of e-SAVs it is critical to first understand and address safety and security concerns of potential and actual users. Researchers at the University of California, Davis, reviewed the literature to understand potential users’ perceptions of safety and security risks posed by intertwined social and technical systems of e-SAVs and proposed a framework to advance research, policy, and system design. This policy brief summarizes the findings of that work and provides policy implications. View the NCST Project Webpage
    Keywords: Social and Behavioral Sciences, Autonomous vehicles, Car pooling (Railroads), Electric vehicles, Literature reviews, Public opinion, Risk taking, Safety and security, Shared mobility, Vehicle sharing
    Date: 2021–02–01
  15. By: Tomaso Duso; Mattia Nardotto; Jo Seldeslachts
    Abstract: We provide an evaluation of the impact of public subsidy schemes that aimed to support the development of basic broadband infrastructure in rural areas of Germany. Such subsidies are subject to state aid control by the European Commission (EC). While the EC increasingly recognises the role of economic analysis in controlling public aid to companies, there are to date no full retrospective studies performed on state aid control, especially assessing the so-called balancing test. In this study, we do not only analyse whether the aid was effective in solving a market failure – low broadband coverage in rural areas – but also study its impact on competitive outcomes, on both rival firms and consumers. We adopt a difference-in-differences framework after using a matching procedure to account for selection on observables. We find that the aid significantly increased broadband coverage. More importantly, we find that the number of internet providers has significantly increased in the municipalities receiving aid. This additional entry decreased average prices. Therefore, the subsidies complied with EU state aid rules, both in terms of effectiveness and competition.
    Keywords: state aid, ex-post evaluation, broadband, coverage, entry, competition, prices
    JEL: C23 D22 L10 L40 L64
    Date: 2021
  16. By: Jean Beuve; Marian W. Moszoro; Pablo T. Spiller
    Abstract: We present a model of public procurement in which both contractual flexibility and political tolerance for contractual deviations determine renegotiations. In the model, contractual flexibility allows for adaptation without formal renegotiation while political tolerance for deviations decreases with political competition. We then compare renegotiation rates of procurement contracts in which the procurer is either a public administration or a private corporation. We find robust evidence consistent with the model predictions: public-to-private contracts are renegotiated more often than comparable private-to-private contracts, and that this pattern is more salient in politically contestable jurisdictions. The frequent renegotiation of public contracts results from their inherent rigidity and provides a relational quality of adaptability to contingencies in politically contestable environments.
    JEL: D23 D72 D73 D78 H57
    Date: 2021–02
  17. By: Guo, B.; Newbery, D.
    Abstract: The UK left the EU Integrated Electricity Market on 31/12/20 and with it access to Single Day Ahead Coupling that clears local and cross-border trades jointly – interconnectors are implicitly auctioned. The new the Trade and Cooperation Agreement requires a replacement “Multi-region loose volume coupling†to be introduced before April 2022. Until then, interconnector capacity is allocated by an explicit day ahead auction before the EU auction with nomination after the EU results are known. The paper measures the risks posed by taking positions in each market separately and the resulting costs of uncoupling of GB’s interconnector trade. It compares four forecasts of price differences under two sequencing of markets and explicit auction, determining traders’ risk premia for each. The current timing leads to lower mistakes on the direction of flows, although higher profit volatility, arguing to retain the current timing. Competitive traders locking in their positions after the explicit auction (overstating costs as subsequent trading out of unprofitable positions is ignored) limit the total loss of interconnector revenue from uncoupling to €31 million/yr., and the social cost of uncoupling is €28 million/yr., considerably below earlier estimates in the literature.
    Keywords: Electricity trading, Market coupling, auctions, price forecasting
    JEL: F14 F15 Q47 Q48 L94
    Date: 2021–03–03
  18. By: Laure-Anne Plumhans
    Date: 2021
  19. By: Günther, Maik; Fallahnejad, Mostafa
    Abstract: With an increasing number of electric vehicles, the strategic planning of public charging infrastructure becomes more important. In this work, the infrastructure of the charging stations in a large city is simulated. Here, various influencing factors such as number of users, charging time, charging frequency, type of the charging station and billing model are modified in order to obtain the optimal construction and operation of public charging infra-structure. The results illustrate conditions under which a system for public charging infrastructure becomes un-stable as the number of users increases. In addition, it is shown, which measures should be used to improve the system characteristics. The results of the simulation reveal that with an increasing number of users a switch of the billing model can be more effective than the construction of additional charging station. Furthermore, it makes sense to construct distributed single charging points in a city at the beginning of the development phase and to switch to satellite systems with more charging points once the number of users has increased sufficiently.
    Keywords: Public charging infrastructure,billing model,user behaviour,electric vehicles,simulation
    Date: 2021
  20. By: Constanze Fettnig
    Date: 2021

This nep-reg issue is ©2021 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.