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In this paper, we revisit the empirical observation that prices rise like rockets when input costs increase but fall like feathers when input costs decrease. The analysis draws on a novel data set that includes daily retail prices of gasoline from 12,804 stations in Germany from January 1, 2014 to December 31, 2018. Our findings based on pooled-panel asymmetric error correction models indicate that the pat)tern of rockets and feathers is the norm rather than the exception. Our results further show that temporal aggregation of station-level price data leads to inaccurate inferences and could account for the inconclusive findings in the literature. [ABSTRACT FROM AUTHOR]

The large-scale integration of renewable energy sources requires flexibility from power markets in the sense that the latter should quickly counterbalance the renewable supply variation driven by weather conditions. Most power markets cannot (yet) provide this flexibility effectively as they suffer from inelastic demand and insufficient flexible storage capacity or flexible conventional suppliers. Research accordingly shows that the volume of renewable energy in the supply system affects the mean and volatility of power prices. We extend this view and show that the level of wind and solar energy supply affects the tails of the electricity price distributions as well and that it does so asymmetrically. The higher the supply from wind and solar energy sources, the fatter the left tail of the price distribution and the thinner the right tail. This implies that one cannot rely on symmetric price distributions for risk management and for valuation of (flexible) power assets. The evidence in this paper suggests that we have to rethink the methods of subsidizing variable renewable supply such that they take into consideration also the flexibility needs of power markets. [ABSTRACT FROM AUTHOR]

This paper analyses the effect of recognizing co-firing coal with biomass as renewable electricity. We provide simulations for the French and German electricity mix. Results indicate that, if co-firing is recognized as a renewable, coal may crowd-out traditional renewables with increased generation and additional investments. Regarding CO2 emissions, we find surges when co-firing is recognized as a renewable. The rise is more significant in Germany due to greater coal capacity. In France, the magnitude depends on the share of nuclear with a lower increase when old nuclear plants are prolonged. Finally, we find that recognizing co-firing as a renewable reduces the overall costs for electricity. We balance the cost saving with the increased social cost from higher CO2 emissions. Results show that the cost saving is lower than the increased carbon cost for society with carbon valuation around 100 Euros/tCO2, except in France when old nuclear plants are not decommissioned. [ABSTRACT FROM AUTHOR]

Many countries plan to decarbonise their energy systems by increasing energy efficiency and expanding the use of renewable energy sources (RES). Such actions require significant investments in new energy infrastructures. While people are generally accepting of these infrastructures, opposition sometimes arises when these developments are sited at close proximity to people's residences. Therefore, it is important to understand what actually drives people's preferences for spatial proximity to different energy infrastructure technologies. This study examines the factors influencing people's proximity preferences to a range of different energy technologies using a cross-country econometric analysis of the stated preference data from an unprecedented survey conducted on nationally representative samples of the population in Ireland, the U.S. and Germany. The survey involved more than 4,500 participants in total. This paper presents the data and selected results from a generalised ordered logit model for each energy technology surveyed. These are; wind turbines, solar power technology, biomass power plant, coalfired power plant and natural gas power plant. The results show that, in general, German and Irish citizens are willing to accept energy infrastructures at smaller distances to their homes than their U.S. counterparts. Moreover, attitudinal factors are found to shape people's preferences more consistently than any of the socio-demographic characteristics. [ABSTRACT FROM AUTHOR]

This paper presents an econometric analysis of curtailment costs of renewable energy sources (RES) in Germany. The study aims at explaining and quantifying the regional variability of RES curtailment, which is a measure to relieve grid overstress by temporarily disconnecting RES from the electricity grid. We apply a Heckit sample selection model, which corrects bias from non-randomly selected samples. The selection equation estimates the probability of occurrence of RES curtailment in a region. The outcome equation corrects for cross-sectional dependence and quantifies the effect of RES on curtailment costs. The results show that wind energy systems connected to the distribution grid increase RES curtailment costs by 0.7% per MW (or 0.2% per GWh) in subregions that have experienced RES curtailment over the period 2015-2017. The implication of this finding is that policymakers should set price signals for renewables that consider the regional grid overstress, in order to mitigate the cost burden on consumers due to excess generation from RES. [ABSTRACT FROM AUTHOR]

The German reserve power market has been subject to important regulatory changes in recent years. A new market design has been introduced by synchro-nizing and interconnecting the four regional German control areas. We analyze whether the reforms have led to lower prices for minute reserve power (MRP). In contrast to existing papers, we use a unique panel dataset to account for un-observed heterogeneity between the four German regional markets. Moreover, we control for endogeneity by using weather data as instruments for electricity spot market prices. We find that the reforms were jointly successful in decreasing MRP prices leading to substantial cost savings for the transmission system operators. [ABSTRACT FROM AUTHOR]

Germany is among the leading countries regarding the promotion of renewable energy towards a sustainable energy system transition. In this paper, we investigate the German pilot auction scheme for solar photovoltaics introduced in the Renewable Energies Act 2014 (EEG 2014) that serves as a pilot for the auction-based promotion of the three major large-scale renewable electricity generation technologies (wind, solar, biomass) as of 2017. A strategic bidding model is used to determine the optimal bidding strategy and to determine the resulting project value. We consider pay-as-bid and uniform pricing and single and multiple bids. Moreover, we investigate the impact of investment cost uncertainty. In a sensitivity analysis we show how bid strategy adjustments affect the outcome. Specifically, higher uncertainty regarding the market clearing price increases the project value, as this additional uncertainty can be used to raise the probability of obtaining a higher level of remuneration by an adjusted auction strategy. The first-price auction can generate additional profits by placing a second, higher bid with a low probability of success. Investment cost uncertainty can have either a positive or negative impact on the project value, depending on the auction parameter values chosen. [ABSTRACT FROM AUTHOR]

This paper presents evidence that the accumulating cost of Germany's ambitious plan to transform its system of energy provision--the so-called Energiewende--is butting up against consumers' willingness-to-pay (WTP) for it. Following a descriptive presentation that traces the German promotion of renewable energy technologies since 2000, we draw on two stated-preference surveys conducted in 2013 and 2015 that elicit the households' WTP for green electricity. Two models are estimated, one based on a closed-ended question framed around Germany's target of 35% renewable energy in electricity provision by 2020, and the other on an open-ended format that captures changes in WTP over time. To deal with the bias that typifies hypothetical responses, the models distinguish respondents according to whether they express definite certainty in their reported WTP. The results from both models reveal a strong contrast between the households' general acceptance of supporting renewable energy technologies and their own WTP for green electricity. [ABSTRACT FROM AUTHOR]

Over the last decade Germany has boosted renewable energy in power production by means of massive subsidies. The flip side are very high electricity prices which raise concerns that the transition cost towards a renewable energy system will be mainly borne by poor households. In this paper, we combine computable general equilibrium and microsimulation analyses to investigate the economic impacts of Germany's renewable energy promotion. We find that the regressive effects of renewable energy promotion could be attenuated by alternative subsidy financing mechanisms. [ABSTRACT FROM AUTHOR]

In this paper the German congestion management regime is analyzed and future congestion management costs are assessed given a higher share of intermittent renewable generation. In this context, cost-based re-dispatching of power plants and technical flexibility through topology optimization are considered as market-based and technical congestion management methods. To replicate the current market regime in Germany a two-step procedure is chosen consisting of a transactional spot market model and a congestion management model. This uniform pricing model is compared to a nodal pricing regime. The results show that currently congestion can mainly be managed by re-dispatching power plants and optimizing the network topology. However, congestion management costs tend to increase significantly in future years if the developments of transmission as well as generation infrastructure diverge. It is concluded that there is a need for improving the current congestion management regime to achieve an efficient long-term development of the German electricity system. [ABSTRACT FROM AUTHOR]

We assess the value of stranded coal-fired power plants in Germany in the light of the critical decision to phase them out by 2038. In a Monte Carlo simulation, the scenarios under consideration (slow decommissioning at the end of the technical lifetime in 2061, the highly probable phase-out by 2038, and an accelerated phase-out by 2030) are additionally assigned distributions to display the uncertainty of future developments. The results show an overall stranded asset value of €2.6 billion given the phase-out by 2038 and an additional €11.6 billion if the phase-out is brought forward by 8 years. This study also describes the impacts of carbon pricing and the feed-in from renewable energy sources on the merit order and eventually the deterioration in economic conditions for hard coal and lignite power plants. Lastly, we discuss the immediate concerns for the share prices of the affected companies and help to close the research gap regarding stranded physical and financial assets. [ABSTRACT FROM AUTHOR]

The effects of extreme weather events and the resilience of the energy sector have become the subject of regulatory initiatives and ongoing research. We demonstrate the vulnerability of the German power sector to climate change and provide a qualitative and quantitative analysis of emerging risks from two types of extreme weather events: droughts and high temperatures. Our analysis is based on datasets covering temperature and drought data for the last 40 years. We present evidence of a higher frequency of power plant outages as a consequence of droughts and high temperatures. To characterize the vulnerability of the power sector we develop a capacity-adjusted drought index. The results are used to assess the monetary loss of power plant outages due to heatwaves and droughts and losses to consumers due to higher wholesale electricity prices and price volatility. An increasing frequency of such extreme weather events will aggravate the observed problem. [ABSTRACT FROM AUTHOR]

In this work, we study the profitability of energy storage operated in the Nordic, German, and UK electricity day-ahead markets during 2006-2016. During this time period, variable renewable energy sources (vRES) have been rapidly penetrating the markets and increasing the volatility of the residual load, which is often assumed to be associated with improving financial viability of energy storages. However, storage operator profits are not publicly available, in particular not at plant level. We therefore develop a linear optimisation model which maximises profits from arbitraging hourly prices and use the model output of profits and storage operating hours in further econometric analyses. This is a novel approach merging two strands of literature (optimisation and econometrics) in a single energy storage study. Specifically, we quantify and disentangle the effects of electricity demand, solar and wind generation, the spread between gas and coal prices, carbon emission prices and structural breaks on profits and operation of 1-13MWh/MW energy storages. Among others we find that solar generation is associated with lower profits but higher operating frequency of energy storages in Germany. Wind power generation is associated with positive effects on profits in the UK and Germany. vRES does not affect profits or operation of new Nordic energy storages. [ABSTRACT FROM AUTHOR]

We evaluate the efficiency of electricity distribution operators (DSOs) as providers of local public infrastructure. In particular, we consider two types of efficiency, i.e., short-term (transient) and long-term (persistent). We apply the recently developed four-component stochastic frontier model, which allows identifying determinants of the two types of efficiency, after controlling for firm heterogeneity and random noise, to a panel dataset of German DSOs observed during 2006-2012. Those DSOs operating in the eastern parts of Germany have undergone a profound restructuring after the reunification in 1990. We find that this was beneficial for their efficiency as they perform, on average, better in terms of persistent efficiency than DSOs in West Germany. Both eastern and western DSOs perform similarly well in terms of transient efficiency, which is expected as the sector is highly regulated. As such, we provide new insights on identifying the nature and sources of public infrastructure productive inefficiency, which is relevant for public policies. [ABSTRACT FROM AUTHOR]

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. [ABSTRACT FROM AUTHOR]

We estimate direct and indirect energy rebound effects for a wide variety of goods and services in Germany. To this end, we employ a linearized approximation of the popular Almost Ideal Demand System (AIDS) approach suggested by Deaton and Muellbauer (1980). Excluding measures of energy efficiency when estimating rebound can lead to biased results. We compensate for this shortcoming of previous research by explicitly accounting for energy efficiency in our estimations. Using data for Germany from 1970 to 2017, we find moderate direct and significant indirect rebound effects for different energy carriers across four model specifications. The size of the rebound effect proves to be sensitive to the expenditure shares used for the calculations, which in some cases leads to negative overall rebound estimates. [ABSTRACT FROM AUTHOR]

Empirical evidence on households' awareness of electricity prices and potentially divergent demand responses to price changes conditional on price knowledge is scant. Using panel data originating from Germany's Residential Energy Consumption Survey (GRECS), we fill this void by employing an instrumental-variable (IV) approach to cope with the endogeneity of the consumers' tariff choice. By additionally exploiting information on the households' knowledge about power prices, we combine the IV approach with an Endogenous Switching Regression Model to estimate price elasticities for two groups of households, finding that only those households that are informed about prices are sensitive to price changes, whereas the electricity demand of uninformed households is entirely price-inelastic. Based on these results, to curb the electricity consumption of the household sector and its environmental impact, we suggest implementing low-cost information measures on a large scale, such as improving the transparency of tariffs, thereby increasing the saliency of prices. [ABSTRACT FROM AUTHOR]

We investigate the extent and evolution of the links between energy markets using a broad data set consisting of a total of 17 series of prices for commodities such as electricity, natural gas, coal, oil and carbon. The results shed light on a number of relevant issues such as the volatility spillover effect in energy markets (within and across sectors) and the identification of those markets that are exporters (importers) of volatility to (from) other markets, as well as evidence of the time-varying nature of these effects. The main conclusions are: (i) the most integrated European electricity markets appear to be those of Germany, France and the Netherlands; (ii) the Dutch Title Transfer Facility might be on the way to becoming the benchmark price for natural gas in Europe, and (iii) natural gas may be replacing crude oil as the global benchmark price for energy commodities. [ABSTRACT FROM AUTHOR]

We empirically investigate how and why price levels differ across gasoline stations, using the first full year from a novel panel data set including price quotes from virtually all gas stations in Germany. Our analysis specifically explores the role of station heterogeneity in explaining price differences across gasoline stations. Key determinants of price levels are found to be ex-refinery prices as key input costs, a station's location on roads or highway service areas, and brand recognition. A lower number of station-specific services implies lower fuel price levels, as does a more heterogeneous local competitive environment. [ABSTRACT FROM AUTHOR]

The energy transition is dramatically changing the electricity supply industry in Germany implying two big trends. First, significant market entry by third parties (i.e., non-incumbents). Based on empirical evidence, we argue that the emergence of third parties is the immediate result of the large-scale integration of renewable energy sources. The electricity supply industry is changing quickly from a top-down, single-firm game to a decentralized multiple-player system, with far-reaching consequences for the governance and regulatory structure. Second, the incumbent players are facing disruptive challenges: under pressure of the energy transition, conventional centralized generation is losing profit margins very quickly. We analyze the disruptive challenges and sketch how the incumbents respond by splitting their activities into an old business, which is likely to be phased-out, and a new, future-oriented business: renewable energies, the distribution business, and customer-oriented solutions. [ABSTRACT FROM AUTHOR]

Public support for renewables has led to an unexpected investment momentum in Germany. A consequence is reduced wholesale electricity prices, the so-called merit order effect of renewables. We estimate this reduction using an econometric approach and give a quantitative overview of the financial situation of conventional generators. Our results indicate that investments in new conventional capacities are economically unviable. With the current market design, this situation is going to impact supply security at least in the long run. A popular approach to address this issue is the introduction of additional public support for conventional power plants. However, we believe that subsidizing renewable and conventional capacities contradicts the idea of a liberal market. We present two alternatives: State control of investments in renewables through auctions (as proposed by the European Commission), and a premium paid to representatives of the demand side (such as retailers) independence of their shares of renewables. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between regional housing market fundamentals and energy consumption. We argue that dwellings, in particularly rental properties, are not only consumer goods, but also constitute financial market assets. Properties are spatially fixed and traded in regional contexts, where real estate market characteristics like vacancy, income levels, and expectations determine rent and prices, which in turn provide incentives to invest in housing quality. The level of housing quality (e.g. windows, building materials, or heating technology) in turn influences the level of energy consumption. While this view is established in the real estate and urban economics literature, it has only recently found its way into the energy debate. As a result, the relationship between regional housing market fundamentals and energy consumption has received little attention. This study provides a first attempt to address this paucity. Utilizing aggregate data on regional space-heating energy consumption from over 300,000 apartment buildings in 97 German planning regions, the study applies structural equation modeling to estimate the influence of housing market fundamentals on the level housing quality, and subsequently on regional energy consumption. Findings provide first evidence that regional differences in housing market conditions have a significant impact on housing quality and energy consumption. Specifically, the results suggest that carbon abatement programs in buildings should focus on regions with weak housing market fundamentals, as market incentives are unlikely to incentivize investors to invest in housing quality attributes. The authors conclude by highlighting important implications for energy research and avenues for further investigations. [ABSTRACT FROM AUTHOR]

We study the strategic utilization of storage in imperfect electricity markets. We apply a game-theoretic Cournot model to the German power market and analyze different counterfactual and realistic cases of pumped hydro storage. Our main finding is that both storage utilization and storage-related welfare effects depend on storage ownership and the operator's involvement in conventional generation. Strategic operators generally under-utilize owned storage capacity. Strategic storage operation may also lead to welfare losses, in particular if the total storage capacity is controlled by an oligopolistic generator that also owns conventional generation capacity. Yet in the current German situation, pumped hydro storage is not a relevant source of market power. [ABSTRACT FROM AUTHOR]

Most models that are used to analyze support policies for renewable electricity neglect important market features like oligopolistic behavior, emission trading, and restricted cross-border transmission capacities. We use a quantitative electricity market model that accounts for these aspects and decompose the impact of the German Feed-in tariff (FIT) into two frequently counteracting effects: a substitution effect and a permit price effect. We find that the total effect of the policy increases the German consumer price slightly by three percent, while the producer price decreases by eight percent. In addition, emissions from electricity generation in Germany are reduced by eleven percent but are hardly altered on the European scale. Finally, it turns out that price-cost margins of almost all firms are increased by the FIT, while nonetheless, the profits of firms are significantly lowered unless the firms combine relatively carbon-intensive production with a weak connection to the German grid. [ABSTRACT FROM AUTHOR]

Using a panel of household travel diary data collected in Germany between 1997 and 2005, this study assesses the effectiveness of fuel efficiency improvements by estimating the rebound effect, which measures the extent to which higher efficiency causes additional travel. Following a theoretical discussion outlining three alternative definitions of the rebound effect, the econometric analysis generates corresponding estimates using panel methods to control for the effects of unobservables that could otherwise produce spurious results. Our results, which range between 57% and 67%, indicate a rebound that is substantially larger than obtained in other studies, calling into question the efficacy of policies targeted at reducing energy consumption via technological efficiency. [ABSTRACT FROM AUTHOR]

The German energy industries will be subjected to regulation of network access enforced by a sector-specific regulator. Whereas the gas industry broke the regime of negotiated third party access, in electricity nTPA 'worked', although it clearly resulted in a margin squeeze. The government currently discusses whether to use rate-of-return or incentive regulation, to allow ex ante approval of charges, and the length of the regulatory lag. Close examination suggests that generation capacity still is adequate, but in the longer term there is reason to be alert. The regulatory changes and emission trading system can both contribute to supply security by increasing investment. [ABSTRACT FROM AUTHOR]

Presents a study examining the future of Germany's coal market after 1992. When the Single European Internal Market (SEIM) will come into effect; Difficulties facing the coal industry; Information on problems in Germany's coal market before 1992; Information on regulation and financial supports which were provided to the German coal industry; Future development of the coal sector in Germany; Effects of the common market on German coal industry.