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on Regulation |
| By: | Brown, David (University of Alberta, Department of Economics) |
| Abstract: | Motivated by recent government interventions in the form of mandated subsidies for new generation capacity, I examine the impact of subsidized entry of electricity generation capacity on the performance of centralized capacity auctions. Subsidized entry suppresses capacity prices and induces an inefficient allocation of capacity. It also alters the equilibrium generation portfolio determined by the capacity auction. In the short-run, altering the generation portfolio through subsidized entry may lead to lower expected electricity prices in subsequent market interactions. These effects reduce total industry profit, but may increase consumer surplus. Consequently, the effect of subsidized entry on short-run expected welfare is ambiguous. However, subsidized entry also has adverse long-run impacts. The suppressed capacity and electricity prices reduce the incentives of unsubsidized firms to invest in generation capacity. Further, subsidized entry may induce welfare-reducing boom and bust investment cycles and/or may be self-reinforcing. Regulatory policies such as PJM’s Minimum Offer Pricing Rule (MOPR) attempt to eliminate subsidized entry. Under plausible conditions, the long-run resource adequacy issues associated with insufficient capacity investment dominate the potential short-run benefits of subsidized entry such that the MOPR is welfare-enhancing. |
| Keywords: | electricity market design; subsidized entry; resource adequacy; regulatory policy; multi-unit auctions |
| JEL: | D44 L13 L50 L94 |
| Date: | 2014–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2014_007&r=reg |
| By: | Suzi Kerr (Motu Economic and Public Policy Research); Vicki Duscha (Fraunhofer Institute for Systems and Innovation Research) |
| Abstract: | There are many choices within the design of an emissions trading system. In this paper we focus on one specific aspect – the point of regulation for the energy sector. This choice affects transaction costs; comprehensiveness, and hence the amount of emissions covered and the extent to which the potential cost-effectiveness gains are realised; and credibility of the system. We discuss how an “upstream” energy sector emissions trading system works and present arguments for going upstream (in particular, simplicity of administration) while also discussing arguments for other points of regulation in light of the Chinese circumstances. We present experiences with the New Zealand system, the only system that is entirely upstream for energy, showing ways to address issues that may arise with an upstream system. Ultimately the success of emissions trading depends on markets that operate in a relatively free and competitive way. Simply copying others’ systems to the context of a largely controlled economy such as the Chinese one is likely to be ineffective; each system must be uniquely tailored to local circumstances, possibly in China more than ever before. |
| Keywords: | Emissions trading scheme, point of regulation, upstream, energy sector, China, New Zealand |
| JEL: | Q54 Q56 Q58 Q48 H23 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:14_09&r=reg |
| By: | Stephen Perkins |
| Abstract: | This report is based on discussions at an International Transport Forum Roundtable convened in September 2012 to review experience with the regulation of public private partnerships (PPPs) in the transport sector. Conclusions from the debate are developed with reference to the literature, particularly in relation to managing the risks associated with forecasting traffic. The report focuses on actuarial, structural and behavioural approaches to improving the regulation of PPPs and containing liabilities created by PPPs for public finance. It also examines the potential for private financing of infrastructure by treating packages of transport projects as regulated utilities. The report aims to clarify the objectives of PPPs, their impact on public finance and the different types of risk that need to be managed. |
| Date: | 2013–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaab:2013/6-en&r=reg |
| By: | Shilpi, Forhad; Sangraula, Prem; Li, Yue |
| Abstract: | Using bilateral migration flow data from the 2010 population census of Nepal, this paper provides evidence on the importance of public infrastructure and services in determining migration flows. The empirical specification, based on a generalized nested logit model, corrects for the non-random selection of migrants. The results show that migrants prefer areas that are nearer to paved roads and have better access to electricity. Apart from electricity's impact on income and through income on migration, the econometric results indicate that migrants attach substantial amenity value to access to electricity. These findings have important implications for the placement of basic infrastructure projects and the way benefits from these projects are evaluated. |
| Keywords: | Transport Economics Policy&Planning,Population Policies,Economic Theory&Research,Anthropology,Public Sector Economics |
| Date: | 2014–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7047&r=reg |
| By: | Frédéric Branger (CIRED et AgroParisTech ENGREF); Philippe Quirion (CNRS et CIRED) |
| Abstract: | We analyse variations of carbon emissions in the European cement industry from 1990 to 2011, at the European level(EU 27), and at the national level for six major producers (Germany, France, Spain, United Kingdom, Italy and Poland). We apply a Log-Mean Divisia Index (LMDI) method, crossing data from three databases: the Getting the Numbers Right (GNR) database developed by the Cement Sustainability Initiative, the European Union Transaction Log (EUTL), and the Eurostat International Trade database. Our decomposition method allows disentangling seven channels of emissions change: activity, clinker trade, clinker share, alternative fuels, thermal and electric energy efficiency, and electricity decarbonisation. We find that, apart from a slow trend of emissions reductions coming from technological improvements(first from a decrease in the clinker share, then from an increase in alternative fuels), most of the emissions changes can be attributed to the activity effect. Using counterfactual scenarios, we estimate that the introduction of the EU ETS brought small but positive technological abatement (2.0% ± 1.1% between 2005 and 2011). Moreover, we find that the European cement industry have gained 3.5 billion euros of “overallocation profits”, mostly due to the slowdown of production. Based on these findings, we advocate for output-based allocations, based on a stringent hybrid clinker and cement benchmarking. |
| Keywords: | Cement Industry, LMDI, EU ETS, Abatement, Overallocation, Windfall Profits, Overallocation Profits, Carbon Emissions, Energy Efficiency. |
| JEL: | Q58 Q54 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:fae:wpaper:2014.10&r=reg |
| By: | Edmond Baranes; Julien Jacqmin; Jean-Christophe Poudou |
| Abstract: | This paper studies the links between renewable and non-renewable intermittent energy sources in the production of electricity. More precisely, we argue that the relationship between the natural gas price and capacity investments in solar and wind power energy is far from univocal. We find that this relationship is not linear but is better represented by a bell-shaped curve. Hence, for relativelly low gas price, the two modes of production are substitutable. After a price threshhold is reached, the two are complementary. A theoretical model explains this as the trade-off resulting from two forces: the input price differential of these two modes of production and the risks related to the unpredictable nature of the intermittence of renewable energies. Using U.S. state level data from 1998 to 2012, we find that this relationship is robust to various empirical specifications. |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:14-09&r=reg |
| By: | Miguel Cárdenas Rodríguez; Ivan Haščič; Nick Johnstone; Jérôme Silva; Antoine Ferey |
| Abstract: | This paper analyses the effects of government policies on flows of private finance for investment in renewable energy (inducement effect). It also examines whether direct provision of public finance for a project increases the volume of private finance raised (“crowding in” effect). A unique dataset of financial transactions for renewable energy projects with worldwide coverage is constructed using the Bloomberg New Energy Finance database. The analysis covers 87 countries, six renewable energy sectors (wind, solar, biomass, small hydropower, marine and geothermal) and the 2000-2011 time-span. Main findings are that, in contrast to quota-based schemes, price-based support schemes are positively correlated with investors’ ability to raise private finance. The paper suggests that, rather than the type of instrument (price vs. quota), it is the specific design of such schemes that is key to providing a predictable signal and an effective incentive to attract private investors. It is also found that public finance supports precisely those projects that have had difficulty raising private finance (co-financed projects), where neither quota-based measures nor price-based support schemes have a significant effect on private finance flows. This raises the concern that in the absence of well-designed policies which incentivise private finance investment, governments wishing to secure project completion have no other choice than to support projects directly through the use of public finance. Ce document porte sur l’analyse des effets des politiques publiques sur les flux financiers privés affectés à l'investissement dans les énergies renouvelables (effet d'induction). Il examine également si l’apport direct de fonds publics à un projet renforce la probabilité d'obtention de financements privés (effet d'attraction). Cette analyse est fondée sur une base de données sans équivalent sur les financements d'actifs (c'est-à-dire sur les opérations d'investissement réalisées dans des projets d'énergie renouvelable) construite à partir de la base de données Bloomberg sur le financement des énergies nouvelles (BNEF, Bloomberg New Energy Finance), couvrant tous les pays. Les principaux résultats indiquent que contrairement aux systèmes fondés sur des quotas, les dispositifs de soutien fondés sur les prix sont corrélés positivement avec la capacité des investisseurs à obtenir des financements privés. Notre analyse suggère que, davantage que le type de dispositif utilisé (instrument fondé sur les prix ou système de quotas), c'est la conception spécifique de ces dispositifs qui est déterminante pour donner des signaux prévisibles et des incitations efficaces attirant les investisseurs privés. L’analyse conclue également que les financements publics sont précisément affectés aux projets qui ont eu des difficultés à attirer des fonds privés (projets cofinancés), très probablement parce qu'ils ne sont pas économiquement viables en l'absence d'un tel soutien. Cela laisse à penser qu'en l'absence de politiques publiques judicieusement conçues, permettant d'attirer des investissements financiers privés, les gouvernements souhaitant garantir l'achèvement d'un projet n'aient pas d'autre choix que de soutenir directement ledit projet à travers des financements publics. |
| Keywords: | renewable energy, technology deployment, investment, finance, policy instrument choice, choix des instruments d'action, innovation induite, financement d'actifs, investissement, énergie renouvelable |
| JEL: | G3 H23 L94 O3 Q42 Q48 Q54 Q55 Q58 |
| Date: | 2014–10–16 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:67-en&r=reg |
| By: | Frédéric Branger (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - AgroParisTech, AgroParisTech - AgroParisTech); Jean-Pierre Ponssard (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Oliver Sartor (IDDRI - Institut du Développement Durable et des Relations Internationales - Institut d'Études Politiques [IEP] - Paris); Misato Sato (London School of Economics - [-]) |
| Abstract: | This paper investigates incentives for firms to increase output above the activity level thresholds (ALTs) in order to obtain more free allowances in the EU Emissions Trading Scheme. While ALTs were introduced in order to reduce excess free allocation to low-activity installations, for installations operating below the threshold, the financial gain from increasing output to reach the threshold may outweigh the costs. Using installation level data for 246 clinker plants, we estimate the effect of ALTs on output decisions. The ALTs induced 5.8Mt of excess clinker production in 2012 (4% of total EU output), which corresponds to 5.2Mt of excess CO2 emissions (over 5% of total sector emissions). As intended, ALTs do reduce overallocation (by 6.6million allowances) relative to a scenario without ALTs, but an alternative output based allocation would further reduce overallocation by 39.5million allowances (29% of total cement sector free allocation). Firms responded disproportionately to ALTs in countries with low demand, especially in Spain and Greece. The excess clinker output lead to increased EU clinker and cement exports, production shifting between plants and also an increase in clinker content of cement thus reducing the carbon efficiency of cement production. |
| Keywords: | Activity level thresholds, EU ETS, carbon trading, free allowance allocations, cement |
| Date: | 2014–10–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01072736&r=reg |
| By: | Michele Polo; Carlo Scarpa |
| Abstract: | This paper examines retail competition in a liberalized gas market. Vertically integrated firms run both wholesale activities (buying gas from the producers under take-or-pay obligations) and retail activities (selling gas to final customers). The market is decentralized and the firms decide which customers to serve, competing then in prices. We show that TOP clauses limit the incentives to face-to-face competition and determine segmentation and monopoly pricing even when entry of new competitors occurs. The development of wholesale trade, instead, may induce generalized entry and retail competition. This equilibrium outcome is obtained if a compulsory wholesale market is introduced, even when firms are vertically integrated, or under vertical separation of wholesale and retail activites when firms can use only linear bilateral contracts. |
| Keywords: | Entry, Segmentation, capacity constraints, wholesale markets. |
| JEL: | L11 L13 L95 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp49&r=reg |
| By: | Elizondo Azuela, Gabriela; Barroso, Luiz; Khanna, Ashish; Wang, Xiaodong; Wu, Yun; Cunha, Gabriel |
| Abstract: | This paper considers the design and performance of auction mechanisms used to deploy renewable energy in three emerging economies: Brazil, China, and India. The analysis focuses on the countries'experience in various dimensions, including price reductions, bidding dynamics, coordination with transmission planning, risk allocation strategies, and the issue of domestic content. Several countries have turned to public competitive bidding as a mechanism for developing the renewable generation sector in recent years, with the number of countries implementing some sort of auction procedure rising from nine in 2009 to 36 by the end of 2011 and about 43 in 2013. In general, the use of auctions makes sense when the contracting authority expects a large volume of potentially suitable bids, so that the gains from competition can offset the costs of implementation. A study of the successes and failures of the particular auction design schemes described in this paper can be instrumental in informing future policy making. |
| Keywords: | Energy Production and Transportation,Markets and Market Access,Climate Change Mitigation and Green House Gases,Debt Markets,Emerging Markets |
| Date: | 2014–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7062&r=reg |
| By: | Lucas, Nigel |
| Abstract: | Three case studies illustrate some of the secondary consequences of the search for energy security and its relationship to regional trade and cooperation: the role of the People’s Republic of China, the emerging market in biofuels in Southeast Asia, and diverse feed-in tariffs for renewable energy. The three main ways regional cooperation can strengthen national policies on energy security are (i) sharing information and knowledge to create a sound evidence base for policies, (ii) agreeing on common policies, and (iii) developing subregional markets in electricity and gas. The priorities of the knowledge base should be energy efficiency and renewable energy; in many cases it will be advantageous to work further toward harmonized policies. In the long term, the biggest impact of regional cooperation on national energy security will be creating regional networks; developing subregional markets will likely be the most effective approach. An Asian infrastructure cell at the Asian Development Bank could identify technically feasible projects of Asian interest and determine country support; serve as the secretariat for an Asian infrastructure fund; further monitor the development of subregional markets in electricity and gas; and encourage a harmonized approach through facilitating information exchanges, dialogues, and regional agreements. |
| Keywords: | energy security; regional cooperation; energy sustainability; renewable energy; Asia and the Pacific |
| JEL: | F10 F15 Q40 Q43 Q48 |
| Date: | 2014–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0407&r=reg |
| By: | Ghani, Ejaz; Goswami, Arti Grover; Kerr, William R. |
| Abstract: | India's manufacturing sector has undergone many spatial adjustments since 1989, including, for example, the organized sector's migration to rural locations, the powerful rise of informal manufacturing within cities, and the development of intermediate cities for manufacturing. This paper investigates the impact of these spatial adjustments for electricity usage in India’s manufacturing sector. Striking spatial differences in energy usage exist, and whether spatial adjustments exacerbate or alleviate energy consumption strains is important for issues ranging from reducing India's power blackouts to stemming rising pollution levels. Using detailed surveys for the organized and unorganized sectors, the analysis finds that electricity usage per unit of output in urban plants declined steadily during 1989-2010. In the rural areas, by contrast, electricity consumption per unit of output for organized sector plants peaked in 2000 and thereafter declined. Decomposing the observed trends in aggregate electricity usage from 2000 onwards, the paper finds that most reductions in electricity usage per unit of output came from reductions in existing sites of activity (defined through state-industry-urban/rural cells). The second biggest factor leading to reduced usage was lower usage in fast-growing sectors. By contrast, spatial movements of manufacturing activity across India did not significantly change usage levels and may have even increased them. This appears to have been in part because of the split nature of the mobility, with organized and unorganized sectors migrating in opposite directions. |
| Keywords: | Energy Production and Transportation,Climate Change Mitigation and Green House Gases,Environment and Energy Efficiency,Energy and Environment,Energy Demand |
| Date: | 2014–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7055&r=reg |