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on Regulation |
| By: | Robert M. Hunt; Konstantinos Serfes; Yin Zhang |
| Abstract: | In a two-sided model of the payment card market, we introduce a specific form of elastic demand (constant elasticity), merchant market power, ad valorem fees, and cash as an alternative. We derive the “credit card tax, ” consisting of an endogenously determined interchange fee and any rewards paid. We characterize how this tax influences prices, profits, and welfare. We also examine how these relationships vary under different assumptions about the elasticity of demand, merchant market power, and differentiation between cash and credit. Under the assumptions of our model, by endogenizing the credit card tax, we show that capping interchange fees benefits all consumers by lowering these taxes, even if rewards decrease. |
| Keywords: | credit cards; two sided networks; merchant competition; interchange fees; regulation |
| JEL: | L13 L40 G28 E42 |
| Date: | 2025–06–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:100061 |
| By: | Germà Bel (GiM-IREA, Universitat de Barcelona, Spain.); Joël Bühler (GiM-IREA, Universitat de Barcelona, Spain.) |
| Abstract: | We study how the privatisation of urban water is being challenged in Catalonia, which has a high proportion of private management and a high degree of monopolisation in the water contract market, compared to Spain. We use detailed and up-to-date municipal data to study the dynamics of monopolisation and remunicipalisation. We find that remunicipalisation, rather than potential competition for contracts, is a remedy against monopolisation. Inter-municipal cooperation in Catalonia facilitated the implementation of remunicipalisation in smaller municipalities. In addition, we analyse the democratisation of water management following remunicipalisation and find that progress was modest, both in Catalonia and in Spain. |
| Keywords: | Privatisation; Monopolisation; Remunicipalisation; Cooperation; Democratisation; Commons. JEL classification: B50, D42, H42, L33. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:ira:wpaper:202503 |
| By: | Pollitt, M. G.; Mitchell, R.; Duma, D.; Covatariu, A. |
| Abstract: | The connection queue in Great Britain (GB) is recognized as a major challenge for transmission and distribution networks and for the energy transition. The queue reached 726 GW in July 2024 for generation and storage, but it is also significant on the demand side. The drivers of this problem have been identified by the government, the regulator and the industry. One of the drivers is the inability of the First Come First Served (FCFS) rule – the de facto system of allocation – to account for the feasibility, progress and value of the different projects applying for connection. This paper explores this latter aspect, by taking inspiration from the literature on auction theory, mechanism design and queuing theory. The paper discusses potential changes to the initial (primary) allocation of connection rights in light of concepts such as the beauty contest and the Knapsack problem, and to queue management by potentially introducing a secondary trading of connection rights to increase efficiency. The paper also discusses the risks and potential biases of such changes, including asymmetric information and strategic behaviour. |
| Keywords: | Distribution System Operators, Auction Theory, Queuing Theory, Grid Connection Queue |
| JEL: | D44 L94 |
| Date: | 2025–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2534 |
| By: | Newbery, D. |
| Abstract: | At high penetration levels, the ratio of the marginal: average curtailment (mc/ac) of an extra MW of wind is typically 3+ times its average. For a portfolio of on- and off-shore wind and solar PV, the ratio is considerably higher. With increasing methods of using potentially surplus VRE (exports, storage) average curtailment falls but the mc/ac ratio rises. The marginal levelised cost of VRE is inversely proportional to the Marginal Capacity Factor, which falls as marginal curtailment increases, raising concerns that reducing average curtailment may not lower the marginal cost of VRE. This paper proves this is not the case. Reducing curtailment has a magnified effect on marginal curtailment and does indeed lower the marginal cost of VRE. |
| Keywords: | Variable Renewable Electricity, Marginal Curtailment, Average Curtailment, Levelised Cost of Electricity, VRE Support Design |
| JEL: | L94 Q42 Q48 |
| Date: | 2025–02–18 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2511 |
| By: | Hei Kan Lou; Michael G Pollitt; David Robinson; Angel Vargas Arcos |
| Keywords: | Iberian Exception, energy crisis, gas price cap, electricity market |
| JEL: | L94 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2513 |
| By: | Simshauser, P.; Gilmore, J. |
| Abstract: | Decarbonising our power systems requires coal plant to exit and be replaced by intermittent renewables, along with a diversified fleet of flexible firming plant (viz. batteries, pumped hydro, gas turbines). It also requires electrification of the gas market. In Australia’s National Electricity Market, certain jurisdictions have sought to pursue power system decarbonisation and electrification of gas loads simultaneously. Using 40 years of weather re-analysis data in parallel electricity and gas market models, we identify the generation plant investment task required to meet the primal energy policy task of minimising cost, subject to reliability and CO2 emissions constraints. The outstanding renewable investment task is very material, and accelerating electrification may have the unintended effect of entrenching coal plant for longer. Further, a large fleet of gas turbines is required to deal with intermittency during winter months when renewables experience annual output nadirs. Yet a larger gas turbine fleet produces an acute peak (gas) demand problem during critical event winter days. Electrification of gas customers reduces annual gas demand, but ironically, gas turbine output on those critical event days means there is little change in daily maximum gas demand. This is quite a paradox – electrification policy signals the structural decline of gas networks, yet gas turbines and supporting gas storage and pipeline infrastructure become critical to maintain security of supply. Careful investment planning and policy sequencing is therefore required. |
| Keywords: | Electrification, Renewables, Natural Gas, Energy-Only Markets, Dispatchable Plant Capacity |
| JEL: | D52 D53 G12 L94 Q40 |
| Date: | 2025–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2528 |
| By: | Simshauser, P.; Shellshear, E. |
| Abstract: | Renewable Energy Zones (REZ) and the associated transmission network infrastructure are an important policy development in Australia’s transitioning electricity market. REZs form the basis upon which to expand the renewable hosting capacity of the National Electricity Market (NEM) at scale, while simultaneously minimising the footprint of infrastructure – noting community, cultural heritage and environmental (i.e. biodiversity) sensitivities. In the NEM’s Queensland region, REZs are developed outside the regulatory framework as non-regulated or ‘merchant’ assets, with connecting generators paying user charges. Early REZs involved a small number of committed generators connecting to, and fully subscribing, the REZ asset. Under such conditions, cost allocation is straight forward. But when a geographically dispersed coalition of generators seek to connect over different timeframes and with longer distances involved – the cost allocation task and the tractability of merchant REZ commitment rises in complexity. Since merchant REZs are a novel concept, there is no historic practice to draw from. In this article, we identify the optimal coalition of connecting generators and rely on Shapley’s (1951) seminal work to devise a fair and efficient set of user charges, albeit in the context of renewable power project development. We also examine how to deal with transient idle capacity through structured financing and regulatory policy. |
| Keywords: | Renewable Energy Zones, Renewables, Battery Storage, Shapely Value |
| JEL: | D52 D53 G12 L94 Q40 |
| Date: | 2025–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2524 |
| By: | Wolf D. Grossmann (University of Graz, Austria); Iris Grossmann (Chatham University, Pittsburgh, United States); Karl W. Steininger (University of Graz, Austria) |
| Abstract: | For the transition to fully renewable energy the residual load - the portion of the load that is not yet generated from renewables - has to be replaced with renewable electricity. Photovoltaics (PV) is of particular interest given possible low electricity costs. However, firm electricity from PV is still expensive due to intermittency, in particular seasonally. We describe and apply a two-part non-linear optimization method. First, optimal percentages of solar generation capacity at different sites are determined to closely approximate a given load pattern. Results are best when sites on both hemispheres and in many time zones are connected. We then describe and apply a second method that utilizes the combination of sites determined during the first phase to find a cost-optimal pairing of PV and storage that delivers firm electricity for the given load pattern. Costs of firm electricity for common load patterns, e.g. the European Union or a linear load, could be less than USD 20/MWh, without transmission, if global generation sites are utilized. Long submarine power cables are being planned and built globally, enabling enhanced technological learning and consequently declining costs. We discuss several examples of combinations of solar generation sites with overall electricity costs including transmission depending on expected learning rates. This approach could help identify stable configurations for affordable and firm electricity from renewables and inform plans for necessary long-distance power transmission infrastructure. We also give an example of an intercontinental power cable that could be built along the known route of an existing submarine telecom cable. |
| Keywords: | renewable electricity, photovoltaics, storage, firm electricity cost, renewable system design |
| JEL: | C61 D24 Q21 Q42 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2025-06 |
| By: | Abada, I.; Ehrenmann, A. |
| Abstract: | Risk-mitigation instruments are essential for fostering investments in renewable electricity-production assets and their role is all the more important in the case of market incompleteness. At the same time, such instruments may induce distortions of competition, thereby limiting the effectiveness of spot markets. An example of such an effect is the dramatic increase in negative prices observed in many power markets. Some mechanisms that protect investors from risk decouple operating incentives from spot prices, leading to inefficient trading. At the same time, those negative prices incentivize investments in storage. Such distortions have so far been overlooked in most quantitative research focused on market incompleteness. Using a bi-level programming approach, this paper proposes a framework within which to integrate market distortions when analyzing incompleteness. The lower level of the framework models the power economy via an equilibrium formulation of the two-stage investment problem under risk aversion, where agents invest in the first stage before operating in the stochastic second stage. A central planner offers a set of risk-mitigation schemes in the form of Contracts for Difference and price markups to foster investments, but these schemes can distort competitive bidding. On the upper level, the central planner tunes the design of contracts optimally so that social welfare is maximized. We provide an existence result and undertake a thorough numerical simulation inspired by the French power system, which demonstrates the potential for optimally adjusting the risk-mitigation instruments offered to electricity producers to enhance welfare and limit the prevalence of negative prices. |
| Keywords: | Incomplete Markets, Market Distortion, Bi-level Programming, Stochastic Equilibrium Models, Optimal Regulation, Power Markets |
| JEL: | D81 C72 C73 Q41 |
| Date: | 2025–03–25 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2525 |
| By: | Hjertstrand, Per (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Mälardalen University and) |
| Abstract: | This paper develops a simple nonparametric test for perfect competition in markets for homogeneous goods. The method only requires data on prices and some aggregate of output. We then generalize the method to account for variable capacity and intertemporal production decisions. We apply the method to a sample of Swedish data from the Nordic wholesale electricity market. The main results show that the data are approximately rationalizable by perfect competition in bidding zones with low ownership concentration of generation assets, but not in bidding zones characterized by high ownership concentration. |
| Keywords: | Competition; Nonparametric methods; Nord Pool power exchange; Wholesale electricity markets |
| JEL: | D22 D43 D44 |
| Date: | 2025–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1527 |
| By: | Newbery, D.; Chyong, C. K |
| Abstract: | At high penetration levels, the marginal curtailment of an extra MW of wind is typically 3+ times its average. With a portfolio of different technologies (on- and offshore wind, solar PV), an extra MW of any single technology can increase the curtailment of all technologies, increasing the marginal: average curtailment ratio and the cost of displacing fossil generation. Higher expected future capacity factors amplify this ratio. Increasing nuclear output can also cause renewable curtailment but its effect is smaller than increasing VRE to give equivalent extra output. The choice of the VRE expansion plan depends on whether the potential, average, or marginal capacity factors are used. Storage and trade significantly increase the curtailment ratio but lower delivered costs, with higher VRE penetration in neighbouring markets further amplifying curtailment. |
| Keywords: | Variable Renewable Electricity, Marginal Curtailment, Least-Cost Expansion |
| JEL: | H23 L94 Q28 Q42 Q48 |
| Date: | 2025–04–14 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2526 |
| By: | Lisa Heidelmeier; Marco Sahm |
| Abstract: | We investigate the impact of an environmental award in a Bertrand duopoly with green consumers considering a three-stage game. First, the regulator designs the environmental contest. Second, firms choose their green investments, and the winner of the contest is awarded. Third, firms compete in prices, and consumption takes place. We illustrate that the award not only incentivizes green investments and may thus reduce environmental externalities. As consumers perceive the product of the awarded firm to be of superior quality, it also gives rise to vertical product differentiation. This induces market power, and thus anti-competitive effects: Rents shift from consumers to producers, and consumer surplus may decrease, particularly if marginal investment costs in green technologies are high compared to the strength of environmental damage. |
| Keywords: | Bertrand competition, contests, environmental award, green consumer, product differentiation |
| JEL: | D43 H23 L13 L51 Q52 Q58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11879 |
| By: | Ouafae El Ganaoui Mourlan (IFPEN - IFP Energies nouvelles); El Hadj Miliani (IFPEN - IFP Energies nouvelles); Meryem Moussadeq (IFPEN - IFP Energies nouvelles, IFP School); Bilal Kabalan (LICIT-Eco7 - Laboratoire d’Ingénierie Circulation Transport et Éco-gestion des systèmes énergétiques pour les transports - ENTPE - École Nationale des Travaux Publics de l'État - Université Gustave Eiffel) |
| Abstract: | As electric mobility gains popularity, Electric Vehicles (EVs) and their batteries are becoming more attractive due to their size and energy density advantages. However, the electric grid has not undergone similar improvements, potentially impacting power stability and affecting EV energy usage and availability. The key challenge lies in managing increasing power demands from a fully EV fleet. To address this, efforts are needed to analyze the integration of EVs into the grid and optimize power distribution. In this paper, an innovative Energy Management Strategy (EMS) is proposed to effectively control energy loads, energy sources, and EVs, incorporating Vehicle-to-Grid (V2G) capability. The EMS optimizes energy flow and storage based on time of day, potential energy production, and the cost of grid electricity. The integration of this EMS results in significant benefits, with approximately 12% savings in electricity bills compared to a reference strategy. |
| Keywords: | Electric vehicles, Renewable energy sources, Vehicle-to-grid, Smart grid, Microgrid, Energy management strategy, Optimization |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05075708 |
| By: | Bhupendra Kumar Singh; Venkatachalam Anbumozhi (Economic Research Institute for ASEAN and East Asia (ERIA)); Rakesh Kumar Agarwal |
| Abstract: | : Advancing power trade requires efficient grid connectivity. In 2018, India launched the One Sun, One World, One Grid (OSOWOG) initiative, which aims to connect India to Southeast Asia – facilitating increased power trade. Despite many challenges, such as regulatory disparities, infrastructure limitations, and geopolitical complexities, regional grid connectivity between India and Southeast Asia would bring many opportunities for investment, technology transfer, and employment generation. To achieve these, strategic interventions are required to harmonise regulatory frameworks, invest in advanced infrastructure, and foster diplomatic engagement |
| Keywords: | Cross-border power trade; grid connectivity; energy security; sustainability; regional cooperation |
| JEL: | Q41 Q43 Q35 Q37 Q48 |
| Date: | 2025–05–30 |
| URL: | https://d.repec.org/n?u=RePEc:era:wpaper:dp-2025-02 |
| By: | Christoph Boehringer (University of Oldenburg, Department of Economics); Carsten Helm |
| Abstract: | Deep decarbonization requires electrification of energy-related processes across all sectors of the economy. This so-called sector coupling has important implications for quantity-based regulations in the electricity sector which overlap with measures that promote electricity-based technologies in other sectors, like subsidies for electric vehicles, CO2 taxes on fossil technologies, or a separate ETS in the transport and buildings sectors. We show this for emissions trading systems (ETS) and renewable portfolio standards (RPS). The switch to electricity-based technologies usually strengthens an existing RPS. For the EU ETS, the switch raises demand for emission allowances in countries with such additional policies, but emission reductions come from all countries within the ETS. There is thus a reverse waterbed effect. Numerical simulations for overlapping regulations in the EU and the US underpin the policy relevance. They suggest that overlapping policies should generally target sectors not covered by quantity instruments such as an ETS or RPS. |
| Keywords: | Sector coupling, overlapping regulation, cap and trade, renewable portfolio standards, unilateralaction, reverse waterbed effect |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:old:dpaper:453 |
| By: | Nicholas Bloom; Jonathan S. Hartley; Raffaella Sadun; Rachel Schuh; John Van Reenen |
| Abstract: | We show better-managed firms are more dynamic in plant acquisitions, disposals, openings and closings in U.S. Census and international data. Better-managed firms also birth better-managed plants and improve the performance of the plants they acquire. To explain these findings, we build a model with two key elements. First, management is a combination of firm-level management ability (e.g. CEO quality), which can be transferred to all plants, and plant-level management practices, which can be changed through intangible investment (e.g. consulting or training). Second, management both raises productivity and also reduces the operational costs of dynamism: buying, selling, opening and closing plants. We structurally estimate the model on Census microdata, fitting our key dynamic moments, and then use it to establish three additional results. First, mergers and acquisitions raise economy-wide management and productivity by reallocating plants to firms with higher management ability. Banning M&A would depress GDP and management by about 15%. Second, greater product market competition improves both management and productivity by reallocating away from badly managed plants. Finally, management practices account for about a fifth of the cross-country productivity differences with the US. |
| Keywords: | management practices, mergers and acquisitions, productivity, competition |
| Date: | 2025–05–06 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2102 |
| By: | Intan Murnira Ramli (Economic Research Institute for ASEAN and East Asia (ERIA)); Mohamad Izahar Mohamad Izham |
| Abstract: | In realising a resilient, innovative, dynamic, and people-centred ASEAN by 2045, the region must be guided by the Core Elements of the ASEAN Community’s Post-2025 Vision – endorsed at the 42nd ASEAN Summit in Labuan Bajo, Indonesia. To this end, ASEAN has adopted a strategic plan known as ‘Vision 2045, ’ which outlines its transformation into a globally influential, interconnected, and prosperous region. Vision 2045 expands upon the current ASEAN Community Vision 2025 by addressing contemporary challenges such as digital transformation, environmental sustainability, and socio-economic inequities. This Policy Brief examines the requirements for the next phase of ASEAN’s evolution. Their focus is on ensuring that the ASEAN Community Vision 2045 and the ASEAN Connectivity Strategic Plan 2026–2030 are achieved, particularly through the integration of Good Regulatory Practice (GRP). Latest Articles |
| Date: | 2025–05–30 |
| URL: | https://d.repec.org/n?u=RePEc:era:wpaper:pb-2025-02 |