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on Regulation |
| By: | Fridrik Mar Baldursson; Julia Bellenbaum; Ewa Lazarczyk; Lenja Niesen; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen)) |
| Abstract: | We develop an analytical model to derive the competitive market equilibrium for electricity spot and reserve markets under stochastic demand and uncertain renewable electricity generation. We then derive the welfare-optimal provision of reserves. At rst-best, cost of reserve capacity is balanced against expected cost of outages. The rst-best market equilibrium of the model implies an increase of reserve provision with a growing share of renewable generation. Furthermore, a growing share of renewable generation decreases the level of reliability as measured in energy not served. Additionally, required reserves to balance higher expected deviations will be more expensive, resulting in a trade-o between higher reserve costs and costs of energy not served. |
| Keywords: | Renewable Energy Sources, Electricity Reserves, Reliability, Electricity Market |
| JEL: | Q40 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:dui:wpaper:1703&r=reg |
| By: | Wolfgang Briglauer (Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW) Mannheim); Carlo Cambini, (Politecnico di Torino); Michał Grajek (ESMT European School of Management and Technology) |
| Abstract: | In this paper we study how the coexistence of access regulations for legacy (copper) and fiber networks shapes the incentives to invest in network infrastructure. To this end, we develop a theoretical model explaining investment incentives by incumbent telecom operators and heterogeneous entrants and test its main predictions using panel data from 27 EU member states over the last decade. Our theoretical model extends the existing literature by, among other things, allowing for heterogeneous entrants in internet access markets, as we consider both other telecom and cable TV operators as entrants. In the empirical part, we use a novel data set including information on physical fiber network investments, legacy network access regulation and recently imposed fiber access regulations. Our main finding is that more stringent access regulations for both the legacy and the fiber networks harm investments by incumbent telecom operators, but, in line with our theoretical model, do not affect cable TV operators. |
| Keywords: | Internet access market, access regulation, investment, infrastructure, next generation networks, broadband, telecoms, cable operators and Europe |
| JEL: | L96 L51 |
| Date: | 2017–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:esm:wpaper:esmt-17-02&r=reg |
| By: | Lefouili, Yassine; Toh, Ying Lei |
| Abstract: | This paper analyzes the effects of a privacy regulation that caps the level of data disclosure on investment in quality and social welfare. We develop a model in which a monopolist offers a service for free to consumers with heterogeneous privacy preferences, and derives revenues from disclosing consumer data to third parties. We assume that the users of the service choose how much information they provide to the firm. In this setting, regulating the disclosure level can alter both the extensive margin effect and the intensive margin effect of an investment in quality. In the case where the market is fully covered, a welfare-maximizing regulator who can commit ex ante to a cap on disclosure level finds it optimal to do so when the complementarity between quality and information is not too strong. In the case where the market is partially covered, such an an ex ante disclosure cap may be socially desirable even when quality and information are strongly complementary. Finally, we extend our analysis to the case where the regulator maximizes consumer surplus, and to a scenario where the regulator sets a disclosure cap ex post. |
| Keywords: | Privacy Regulation, Data Disclosure, Quality. |
| JEL: | L15 L4 M21 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:31630&r=reg |
| By: | Olivier JOALLAND; Tina RAMBONILAZA |
| Abstract: | Installing greater numbers of renewable energy solutions in France has the potential to generate various negative externalities for the users of rural areas. Wind turbines and overhead power lines can often be seen as “eyesores” which adversely affect the aesthetic qualities of rural landscapes, thus reducing their use value. In this study, we apply the hedonic price method to evaluate this loss of value from the point of view of the tourist industry. Data were collected relating to the prices of rural gîtes (small cottage rentals) in three French regions. Prices were linked to three categories of variables relating to the properties: characteristics of the properties themselves, the surrounding environment, and their proximity to power-related infrastructure. The generalized method of moments was used to deal with spatial autocorrelation of errors. Our results highlighted the importance of comfort and proximity to the coast in determining the rental value of each property. Landscape value was significantly reduced when properties were located close to energy infrastructures. While it is important not to lose sight of the fact that the majority of rural cottages are located at some considerable distance from energy infrastructures, the losses highlighted in this study show that appropriate support mechanisms need to be put in place in affected rural areas. |
| Keywords: | Externalities - Hedonic prices - Renewable energy -Wind power |
| JEL: | Q51 R11 R33 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2017-10&r=reg |
| By: | Simon Quemin |
| Abstract: | We study intertemporal abatement decisions by an ambiguity averse firm covered under a cap and trade. Ambiguity aversion is introduced to account for the prevalence of regulatory uncertainty in existing cap-and-trade schemes. Ambiguity bears on both the future permit price and the firm's demand for permits. Ambiguity aversion drives equilibrium choices away from intertemporal efficiency and induces two effects: a pessimistic distortion of beliefs that overemphasises 'detrimental' outcomes and a shift in the effective discount factor. Permit allocation is non neutral and the firm's intertemporal abatement decisions do not solely depend on expected future permit prices, but also on its own expected future market position. In particular, pessimism leads the expected net short (resp. long) firm to overabate (resp. underabate) early on relative to intertemporal efficiency. We show that there is a general incentive for early overabatement and that it is more pronounced under auctioning that under free allocation. |
| Keywords: | Emissions trading, Regulatory uncertainty, Permit banking, Ambiguity aversion. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1604&r=reg |
| By: | Liski, M.; Vehviläinen, I. |
| Abstract: | Subsidies to renewable energy are costly and contentious. We estimate the reduction in prices that follows from the subsidized entry of wind power in the Nordic electricity market. A relatively small-scale entry of renewables leads to a large-scale transfer of surplus from the incumbent producers to the consumers: 10 % market share for wind generation eliminates one-half of the total electricity market expenditures. The subsidies generate net gains to consumers. We develop an approach to analyzing storage and renewable energy in equilibrium, and provide an anatomy of a market dominated by such technologies. |
| Keywords: | Electricity, renewables, storage, climate policies |
| JEL: | L51 L94 Q28 Q42 Q48 |
| Date: | 2017–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1701&r=reg |
| By: | Foster, John; Wagner, Liam; Liebman, Ariel |
| Abstract: | This final Future Grid Cluster Project 3 report provides the deployment of key modelling results and the identification of strategic priorities for stakeholders. The purpose of the University of Queensland’s project has been to create “Economic and Investment Models for the Future Grid” and the primary objectives are as follows: Provide broad understanding of how the electricity sector will need to change in a carbon constrained world. This transition to a lower emissions intensive technology base will require significant structural and regulatory reform to the energy markets; Development of quantitative methods to analyse how price levels and volatility on the wholesale electricity market are affected by changes to the transmission network structure and technology deployment; Implement modelling platforms which can inform stakeholders in the energy market of how changing network structure and electricity generation technology effects electricity prices; Develop market simulation platforms for natural gas to gain a better understanding of how changing the fuel and technology mixes will affect the power delivery process; Develop a scenario planning tool set for future electricity market modelling. This deliverable 6 reports the final analysis and results for the Future Grid project for the University of Queensland (UQ). It is also intended to highlight the progress made on the following topics: Modelling the National Electricity Market under fuel price uncertainty and the shift from coal to gas as the primary fuel source in the generation fleet.The tools developed to model the east coast gas market are discussed in the previous deliverable report [1]. The planning and scenario development is discussed in brief below (section 2) and in [2-4]; Modelling the rise Renewable Energy with a proactive consumer base (“Prosumer”) and the effects on the electricity market. The details of proactive consumers affect electricity markets and the development of modelling techniques to accommodate this new consumer class are detailed more fully in [5, 2, 6, 4, 7]. This report summarises the work carried out by the Project 3 team and a separate report details the work of Future Grid Cluster and its interconnections and progress by other projects. The work carried out by this team is also summarized by several working papers available on the Energy Economics and Management Group website . Details of how this and other projects within the cluster have co-contributed to addressing the transition to a carbon constrained future is detailed in its final summary document. |
| Keywords: | Electricity Markets; Energy Economics |
| JEL: | Q2 Q21 Q41 Q42 Q47 Q55 Q58 |
| Date: | 2017–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78866&r=reg |
| By: | Raul V. Fabella (School of Economics, University of the Philippines Diliman; National Academy of Science and Technology) |
| Abstract: | Regulation and competition policy are two alternative modalities by which the state intervenes in the market. In order for either to deliver welfare gains, there must first be a pre-existing market failure. We first present different varieties of market failures and identify those for which regulation is best address (cooperation failures such as The Fishing Game and the Public Goods Game, scale economies-based failures such as a Natural Monopoly and Meta-Market Failures) and those where competition policy works better (market power-based failures such as an artificial monopoly or cartel). We also discuss those market failures which cannot be remedied by an imperfect state. We show graphically the welfare outcomes of various industrial organizations (monopoly, duopoly, Walrasian limit) under the symmetric Cournot competition. We also deal with the welfare implications of imperfect substitutability. We then discuss some welfare implications of the Bertrand competition, its effect on innovation and on the formation of "trusts". We present reasons why competition policy is better than regulation in jurisdictions where institutions are weak. The reasons are: information intensity and asymmetry being greater with regulation, the greater ease of capture of the organs of regulation and, finally, the presence of private players who serve as allies of the competition agency and help monitor abuse of market power. |
| Keywords: | competition policy; regulation; weak institutions; market failures; Cournot competition; Bertrand competition |
| JEL: | K21 L51 L41 L44 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:phs:dpaper:201701&r=reg |
| By: | Marc Baudry; Clément Bonnet |
| Abstract: | Renewable energy technologies are called to play a crucial role in the reduction of greenhouse gas emissions. Since most of these technologies did not yet reach grid parity, public policies can rely on two types of approach: supply push and demand pull. The latter aims at creating demand for new technologies and at stimulating their diffusion. Nevertheless, due to the complex self-sustained dynamics of diffusion and to spillovers between the countries it is hard to determine whether newly installed capacities are imputable to national support policies and/or to policies implemented by neighbor countries. The paper addresses this problem. A micro-founded model of technology diffusion is developed and calibrated. It captures the influence of demand pull policies on installed capacities for six European countries over the last decade. A counter-factual analysis is carried out to assess the impact of demand pull policies on wind power development by taking into account the interplay between national policies via spillovers. |
| Keywords: | Renewable energy, Technology diffusion, Demand pull instruments. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1607&r=reg |
| By: | Pollitt, M.; Yang, C-H.; Chen, H. |
| Abstract: | We begin with a brief background to the current Chinese power market reforms which began with the State Council No.9 Document of March 2015. We introduce 14 different electricity reform elements from international experience. Under each of these reform elements we will discuss: its theoretical significance; general reform experiences with it; and its application in the Chinese context. Our motivation is how China might bring down the currently high industrial price of electricity. We identify four promising sources of price reduction: the introduction of economic dispatch of power plants; rationalisation of electricity transmission and distribution; reduction of high rates of investment; and rebalancing of electricity charges towards residential customers. We draw out some overall lessons and identify some important points for future research into Chinese power market reform. |
| Keywords: | power market reform, international experience, China, industrial electricity price |
| JEL: | L94 |
| Date: | 2017–03–20 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1713&r=reg |
| By: | Pollitt, M. |
| Abstract: | In this paper we raise a number of issues that are important for the UK to consider in the light of its decision to leave the European Union (EU). The first of these is the nature of the EU Single Market in Electricity and Gas and the UK’s role within this. The second is the nature of UK energy policy in the light of Brexit, and the opportunities for changing this. And third, we consider some of the key issues to be addressed in a negotiating position with the EU. |
| Keywords: | Brexit, Energy Policy |
| JEL: | L94 |
| Date: | 2017–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1706&r=reg |
| By: | Ignas Mikalauskas (Vilnius University) |
| Abstract: | The importance of technological advances reaches each and every one. New innovations drive the world we live in, form societies and economies around us. One of the main and primitive questions to every day human is whether or not he can afford a new technology, for a manufacturer ? can he make a profit of selling it, for an environmentalist ? how will it impact the future? One thing is certain ? none of that can be answered if it?s unknown whether the technology is reachable to every day user, starting from the price of the technology itself, including different levels of investments, ending with the costs of actually installing the technologies to common households worldwide, for green, economically growing and sustainable future. |
| Keywords: | renewable energy, innovative renewable energy sources, cost of energy |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:4507196&r=reg |