Search

This paper formulates a model that assesses the economic and policy implications of the adoption and operation of microgrids. The recent climate agreement between the US and China as well as the historic Lima accord on climate change are prompting a massive demand in climate-friendly technologies. Given the increasing demand for electricity and the mounting costs of electricity supply associated with maximizing system performance through an optimal economic scheduling of microgrids, decision makers and policymakers are already facing the problem of sketching energy management strategies for localized operation and grid penetration. We employ a modified Benders' decomposition approach to explore the optimal scheduling of supply from different technology units in the microgrid in the face of supply and demand uncertainties. We guarantee that the power generated by the units meets systemic load while satisfying the primary operational and technological constraints. We implement our model in a quantitative numerical analysis where we investigate the operational regulation in the light of a public environmental policy. We extend prior research on this subject by uncovering a greater reliance on the grid under simultaneous uncertainties in demand and supply. We unlock a strategy for a proper mitigation of the effects of emissions. We find that carbon abatement policy can be used to motivate microgrids operators to invest in fuel cells and natural gas technologies when dealing with uncertainty. [ABSTRACT FROM AUTHOR]

The treatment of trend components in electricity demand is critical for long-term peak load forecasting. When forecasting high frequency variables, like daily or hourly loads, a typical problem is how to make long-term scenarios - regarding demographics, GDP growth, etc. - compatible with short-term projections. Traditional procedures that apply de-trending methods are unable to simulate forecasts under alternative long-term scenarios. On the other hand, existing models that allow for changes in long-term trends tend to be characterized by end-of-year discontinuities. In this paper a novel forecasting procedure is presented that improves upon these approaches and is able to combine long and short-term features by employing temporal disaggregation techniques. This method is applied to forecast electricity load for Spain and its performance is compared to that of a nonlinear autoregressive neural network with exogenous inputs. Our proposed procedure is flexible enough to be applied to different scenarios based on alternative assumptions regarding both long-term trends as well as short-term projections. [ABSTRACT FROM AUTHOR]

This article shows that the liberalization of the residential market for electricity in Chile may achieve important welfare gains. We built a model to assess two policy scenarios: partial and full liberalization. Simulations of the model provide equilibrium prices, the distribution toll, and welfare estimations on factual and counterfactual scenarios. Our policy recommendation is to partially liberalize the residential market for electricity. That is, to allow the entrance into this market but regulate both the incumbent's tariffs for residential customers and the distribution toll. Full liberalization, in which only the distribution toll is regulated, produces a lower increase in welfare. [ABSTRACT FROM AUTHOR]

This paper considers cost allocation in networks where agents are characterized by stochastic demand and supply of a non-storable good, e.g. green energy. The grid itself creates possibilities of exchanging energy between agents and we propose to allocate common costs in proportion to the economic gain of being part of the grid. Our model includes a set of fundamental requirements for the associated trading platform. In particular, it is argued that a suitable mechanism deviates from a traditional market. The approach is illustrated by simulations. [ABSTRACT FROM AUTHOR]

This paper investigates the relationships among performance dimensions associated with corporate social responsibility (CSR) focusing on the U.S. electric utility sector. Results of a statistical copula approach suggest that economic performance of utilities is compatible with environmental, social, and governance performance, The CSR model has the potential to help U.S. electric utilities become better corporate citizens. [ABSTRACT FROM AUTHOR]

We analyze the design of policies to promote efficient distributed generation (DG) of electricity. The optimal policy varies with the set of instruments available to the regulator and with the prevailing DG production technology. DG capacity charges often play a valuable role in inducing optimal investment in DG capacity, allowing payments for DG production to induce the optimal production of electricity using non-intermittent DG technologies. Net metering can be optimal in certain settings, but often is not optimal, especially for non-intermittent DG technologies. [ABSTRACT FROM AUTHOR]

Currently, about one million households in the United Kingdom (UK) have installed solar photovoltaic (PV) panels with about two-thirds of them are using the panels for self-generating power. According to the UK Department of Energy & Climate Change, solar PV deployment in the UK (measured in megawatt) has grown considerably (from 95 MW in 2010 when the feed-in tariff was introduced to 11,429 MW in 2016). The popularity of the solar PV among the UK households made the government to introduce major changes to the scheme. Our paper focuses on the two major questions: Could it be that the system already favours richer consumers or certain types of network user who do not bear either the efficient or fair share of the total system distribution (and transmission) costs? Does the apportionment of charges between fixed, per kW peak and per kWh use of system charges need to be changed to be more cost reflective? We employ the data from the smart meters readings provided by the Customer-Led Network Revolution monitoring trial conducted with the 199 households in the Northern England that provides the data for the household electricity use and tariff behaviour between October 2012 and July 2014. Our analysis demonstrates that, similar to other studies conducted around the world, the increase in the solar PV resulted in a transfer of wealth and costs between customer groups. Due to their own production, UK solar PV consumers yield a lower share of the per kWh costs of the distribution system which leads to the increase of per unit charges as well as the changes in the distribution of their payment between different types of households. [ABSTRACT FROM AUTHOR]

China's Belt and Road Initiative (BRI) is often simplistically understood as being opposed by India and supported by Pakistan. The reality on the ground is rather more complex. The emerging consensus in India appears to be that, far from being exclusively an economic and infrastructure development program, the BRI may be understood as a long-term strategic initiative that seeks to convert China's current economic might into diplomatic influence. While attempts have been made by Beijing, the reflexive Indian suspicion of Chinese international projection, including of China's BRI, has not yet been met by a coherent discourse designed to specifically address Indian concerns. In contrast, in Pakistan, widespread acceptance of the importance and necessity of the China-Pakistan Economic Corridor is increasingly coupled with concerns within sectors of Pakistani society over the fairness, transparency and eventual economic outcomes of the project. Accordingly, this paper is divided into two parts: the first looks at how Indian analysts have viewed and responded to the Chinese discourse and arguments on the BRI; the second considers the debate over the China-Pakistan Economic Corridor within Pakistan. [ABSTRACT FROM AUTHOR]

The power sector of Pakistan has undergone major reforms since 1994 with the objectives of increasing technical and financial performance of the sector. This study estimates and analyzes post reforms efficiency dynamics of electric distribution utilities from 2006 to 2013. Fixed effects stochastic frontier analysis results indicate that technical efficiency of utilities increased by 4.8 percent. However, total factor productivity experienced a negative growth of 11 percent as all components of index remained negative except for efficiency change. Productivity of electric distribution utilities can be enhanced by adjusting their scales of operation and reducing their size through further horizontal separation. [ABSTRACT FROM AUTHOR]

Climate change will pose considerable risk to organisations in the 21st century. However, organisational adaptation to climate change has not yet received much attention in the management literature. Drawing on strategic choice theory, we put forward a model proposing that environmental attitudes and climate change knowledge are antecedents of how important adaptation is perceived to be by organisational decision-makers and that the perceived risk towards climate change acts as a mediator in this relationship. We tested the model with responses from 101 managers in the Australian energy industry. Findings of the study show that both environmental attitudes and climate change knowledge have a significantly positive effect on the perceived importance of climate change adaptation and that this relationship is mediated by risk perception. The study highlights the need to draw climate knowledge to the attention of executives and discusses avenues for future research, including the extension of the findings to other industries and settings. [ABSTRACT FROM AUTHOR]

The Inter-Regional Input Output (IRIO) model is developed in 11 manufacturing sectors of China's 30 provincial-level regions. Against the background of electricity pricing and energy-savings, this paper develops and compares the relative sectoral and regional price sensitivities to electricity price and elasticities to electricity demand. The results show that industries such as metal smelting, oil and chemical processing are more sensitive to increasing electricity prices, and have a higher potential of energy-savings. Remarkable findings hold for the regions of Tianjin, Hebei, Jilin, Guangdong, Zhejiang, Shaanxi and Shandong. [ABSTRACT FROM AUTHOR]

Hawaii generates the majority of its electricity through oil-fired generation. New production technologies have led to rapidly declining natural gas prices that has renewed Hawaii's interest in liquefied natural gas (LNG) imports. This study integrates a detailed model of Hawaii's electric sector with a computable general equilibrium model of Hawaii's economy to estimate the economic and greenhouse gas (GHG) impacts of importing LNG for use in the electric sector. Incorporating a range of possible price pathways (low, medium and high) out to the year 2040 for LNG imports, we find Hawaii could lower electric sector costs in a range from 6 to 16 % and petroleum refining output declines by over 20 % (in 2040). Gross state product increases in a range of $300 million to $5 billion in net present value. Using natural gas reduces out-of-stack GHG emissions but can also increase GHG emissions in other jurisdictions. Moreover, introducing natural gas could reduce the incentive to pursue renewable energy and energy efficiency. As such, adopting and enforcing policies encouraging renewable energy and efficiency becomes even more important to meet Hawaii's clean energy and GHG mitigation goals. [ABSTRACT FROM AUTHOR]

During the last years, the German energy sector and especially its electricity market was affected by a major energy transition, the so called 'Energiewende'. This transition led to an increase of electricity production from renewable sources and thereby affected the whole electricity market. Therefore, it provides lessons for countries, which are only beginning a similar transition away from fossil fuels to renewable energy sources. The aim of this analysis is to assess if there still exists a relationship between fossil fuel and electricity prices. Due to possible structural breaks in the time series a minimum Lagrange Multiplier (LM) stationarity test is applied, which endogenously determines possible structural breaks. Subsequently a bootstrap approach is used to estimate confidence intervals (C.I.s) for the test statistic and the possible break dates. Furthermore, the stability of the cointegration vector is assessed with the test by Hansen and Johansen (. 'Some Tests for Parameter Constancy in Cointegrated VAR-Models.' The Econometrics Journal 2 (2):306-333.). The results indicate that the cointegration relationship is not stable over time. To incorporate these findings, the cointegration analysis is based on . 'Cointegration Analysis in the Presence of Structural Breaks in the Deterministic Trend.' Econometrics Journal 3 (2):216-249), which allows structural breaks in the deterministic part of the cointegration relation. These results support the assumption that the energy transition affected the relationship between fossil fuels and electricity prices, although there still exists a relatively strong cointegration relation between fossil fuel and electricity prices in the long run. [ABSTRACT FROM AUTHOR]

We analyze the effects of electricity market mergers in an environment where firms endogenously choose their level of forward contracts prior to competing in the wholesale market. We apply our model to Alberta's wholesale electricity market. Firms have an incentive to reduce their forward contract coverage in the more concentrated post-merger equilibrium. We demonstrate that endogenous forward contracting magnifies the price increasing impacts of mergers, resulting in larger reductions in consumer surplus. Current market screening procedures used to analyze electricity mergers consider firms' pre-existing forward commitments. We illustrate that ignoring the endogenous nature of firms' forward commitments can yield biased conclusions regarding the impacts of market structure changes such as mergers. In particular, we show that the price effects of mergers can be largely underestimated when forward contract quantities are held at pre-merger levels. Whether the profits of the merged firm are greater with fixed or endogenous forward quantities is ambiguous. [ABSTRACT FROM AUTHOR]

We conduct a fractional integration and cointegration study of several Kenyan electricity price series in order to determine whether signs of persistence or mean reversion can eventually be discovered. Such features can be considered as relevant when considering the possibilities of shocks affecting the energy market of Kenya, which has recently been subjected to major debate. We conclude that electricity prices in Kenya contain unit roots, implying permanent shocks lasting forever. Among the factors affecting electricity prices, we find oil prices and interest rates have significant positive effects on electricity, and based on the fact that all the series are I(1), long run relationships are examined by means of fractional cointegration. The recently introduced FCVAR model is implemented, with results showing that the series under study are fractionally cointegrated, with oil price shocks affecting electricity prices. [ABSTRACT FROM AUTHOR]

The creation of adequate investment incentives has been of great concern in the restructuring of the electricity sector. However, to achieve this, regulators have applied different market designs across countries and regions. In this paper we employ laboratory methods to explore the relationship between market design, capacity provision and pricing in electricity markets. Subjects act as firms, choosing their generation capacity and competing in uniform price auction markets. We compare three regulatory designs: (1) a baseline price cap system that restricts scarcity rents, (2) a price spike regime that effectively lifts these restrictions, and (3) a capacity market that directly rewards the provision of capacity. Restricting price spikes leads to underinvestment. In line with the regulatory intention both alternative designs lead to sufficient investment albeit at the cost of higher energy prices during peak periods and substantial capacity payments in the capacity market regime. To some extent these results confirm theoretical expectations. However, we also find lower than predicted spot market prices as sellers compete relatively intensely in capacities and prices, and the capacity markets are less competitive than predicted. [ABSTRACT FROM AUTHOR]

Markets for green certificates allow generators with market power to squeeze the margins of their competitors, as a generator that is vertically integrated into network activities might do. We analyze this issue in a stylized electricity industry in which a dominant producer of both conventional and renewable energy is facing a competitive fringe of renewable-energy producers. We demonstrate that whether or not a dominant firm is vertically integrated into network activities, it can disadvantage the fringe producers by distorting certificates prices, thereby inducing cost inefficiency in the generation of renewable energy. We compare green certificates to a system of feed-in tariffs, where a similar margin squeeze is not possible. [ABSTRACT FROM AUTHOR]

Market based pricing of CO 2 was designed to control CO 2 emissions by means of the price level, since high CO 2 price levels discourage emissions. In this paper, it will be shown that the level of uncertainty on CO 2 market prices, i.e. the volatility of CO 2 prices itself, has a strong influence not only on generation portfolio risk management but also on CO 2 emissions abatement. A reduction of emissions can be obtained when rational power generation capacity investors decide that the capacity expansion cost risk induced jointly by CO 2 volatility and fossil fuels prices volatility can be efficiently hedged adding to otherwise fossil fuel portfolios some nuclear power as a carbon free asset. This intriguing effect will be discussed using a recently introduced economic analysis tool, called stochastic LCOE theory. The stochastic LCOE theory used here was designed to investigate diversification effects on energy portfolios. In previous papers this theory was used to study diversification effects on portfolios composed of carbon risky fossil technologies and a carbon risk-free nuclear technology in a risk-reward trade-off frame. In this paper the stochastic LCOE theory will be extended to include uncertainty about nuclear power plant construction times, i.e. considering nuclear risky as well, this being the main uncertainty source of financial risk in nuclear technology. Two measures of risk will be used, standard deviation and CVaR deviation, to derive efficient frontiers for generation portfolios. Frontier portfolios will be analyzed in their implications on emissions control. [ABSTRACT FROM AUTHOR]

We test for evidence that energy efficiency features are capitalized into home prices in three U.S. metropolitan areas. Using hedonic regressions and multiple matching procedures, we find that Energy Star certification is associated with higher sales prices in two of the markets: the Research Triangle region of North Carolina and Portland, Oregon. We find that local “green” certifications in Portland and in Austin, Texas, are also associated with higher prices and that the estimated price impacts are larger than those from Energy Star. Matching on observables proves to be important in some cases, reducing the estimated impacts compared with models without matching. We calculate the implied energy savings from the estimated premiums and find that, in the Research Triangle market, the Energy Star premiums approximately equal the savings that program is designed to achieve, but in Portland, the premiums are slightly greater than the program's savings due to low energy costs in the region. [ABSTRACT FROM AUTHOR]

The paper is focused on modelling and analyzing the influence of different regulatory models on the level of quality of supply in electricity distribution, as measured by the duration of interruptions. The paper offers a description of the main features of the models and of the variables that influence service quality, and estimates their effect using a balanced panel data for 9 European Countries. We observe that when companies increase their remuneration by 1%, the duration of interruptions falls by approximately 1%. Regarding the regulatory models, price-cap, revenue-cap and cost plus are seen as the most efficient models for increasing the quality of service (given other resources such as revenues and incentives). The paper controls the differences between performances in the selected Countries and shows that the United Kingdom, Italy, Spain and Austria are the most efficient countries. Additionally, the paper concludes that incentives have a significant effect on quality. [ABSTRACT FROM AUTHOR]

Power pools constitute a set of sometimes complex institutional arrangements for efficiency-enhancing coordination among power systems. In many developing countries, where such institutional arrangements can't be established over the short term, there still can be scope for voluntary electricity-sharing agreements among power systems. Using a particular type of efficient risk-sharing model with no commitment we demonstrate that second-best coordination improvements can be achieved with low to moderate risks of participants leaving the agreement. In the absence of an impartial market operator who can observe production fluctuations in connected power systems, establishing quasi-markets for trading excess electricity helps to achieve some cooperation in mutually beneficial electricity sharing. [ABSTRACT FROM AUTHOR]

Optimization of the electricity markets under modern portfolio theory has a crucial role for financial decision makers. Power suppliers in deregulated electricity markets need to optimize their generation capacities and bidding strategies so as to effectively participate in bilateral contract and spot markets. Market players have to deal with continuously changing electricity prices in competitive electricity market environment during their daily routine system operations. Electricity not like the others is a unique product/service and cannot be stored economically, however it should be generated and consumed simultaneously. In addition to all, power suppliers face with fuel price, water regime, delivery, and network risks. In view of the scene described above, prudent decision making methodologies are of critical importance to maximize profit while minimizing managing risks. This paper presents a comprehensive comparison of mean-variance, down-side, and semi-variance methods for optimization in electricity markets and the corresponding methodologies to maximize the return while minimizing risk. Real Turkish day-ahead market data set between December 2009 and December 2012 is used in numerical calculations. Generation cost data of Hydraulic plants, lignite coal fired thermal power plants, and natural gas combined cycle power plants are taken into consideration in the course of optimization evaluations. In the present of real data, these methods can also be applied to renewable energy generation types. These three methods were able to be applied to all case scenarios effectively and produced efficient frontiers, optimal/minimal portfolios, and utility functions successfully. The results have revealed that the methods significantly provide decisions for power suppliers with different risk aversion levels, and for various instruments to maximize the profit while minimizing the associated market risks, and to meet generation obligations. Consequently, financial optimization under Lower Partial Moments constraints would give notable results in analyzing the efficient frontiers for electricity markets in Turkey. [ABSTRACT FROM AUTHOR]

We investigate the efficiency and environmental impacts of electricity market restructuring by examining changes in fuel efficiency, cost of coal purchases, and utilization among coal-fired power plants based on a panel data set from 1991 to 2005. Our study focuses exclusively on coal-fired power plants and uses panel data covering several years after implementation of restructuring. The estimation compares how investor-owned (IOs) plants in states with restructuring changed their behavior relative to IOs in states without. Our analysis finds that restructuring led to: (1) a 1.4 percent improvement in fuel efficiency, (2) an 8 percent decrease in unit cost of heat input, and (3) a lower capacity factor even after adjusting for cross-plant generation re-allocation due to cost reductions. The estimates imply that restructuring has led to nearly 15 percent savings in operating expenses and up to 7.5 percent emissions reduction among these plants. [ABSTRACT FROM AUTHOR]

Nuclear power is an important pillar in electricity generation in France. However, the French nuclear power plant fleet is ageing, and the possibility of reducing the technology's share in power generation or even a complete phase-out has been increasingly discussed. This paper focuses on three inter-related questions: First, what are the costs of phasing-out nuclear power in France? Second, who has to bear these costs, i.e., how much of the costs will be passed on to the rest of the European power system? And third, what effect does the uncertainty regarding future nuclear policy in France have on system costs? Applying a stochastic optimization model for the European electricity system, the analysis showed that additional system costs in France of a nuclear phase-out amount up to 76 billion € 2010 . Additional costs are mostly borne by the French power system. Surprisingly, the analysis found that the costs of uncertainty are rather limited. Based on the results, it can be concluded that a commitment regarding nuclear policy reform is only mildly beneficial in terms of system cost savings. [ABSTRACT FROM AUTHOR]

I estimate the level of emissions cost pass-through to hourly wholesale electricity prices in Germany, based on spot market data. I control for contemporaneous shocks to demand and supply by constructing a detailed supply curve for fossil generation and intersecting it with residual demand for fossil-based electricity for every hour. Determining the marginal generator allows me to use marginal fuel and allowance costs (rather than prices) as explanatory variables in order to identify the level of cost pass-through directly and with a high level of precision. I find that allowance costs are passed through to electricity prices completely (or nearly completely) on average, but that the degree of pass-through varies over the load curve. My results suggest that there is no economic reason for free allowance allocation to the German electricity sector, and thus I support the updated allocation rules in phase 3 of the European Union Emissions Trading Scheme. [ABSTRACT FROM AUTHOR]

In Germany, substantial drops in wholesale power prices have become a regular phenomenon. While such price drops have far-reaching implications for the functioning of the power market, their underlying determinants remain poorly understood. To fill this gap, we propose a Markov regime-switching model to investigate low-price events at the European Power Exchange. Our analysis focuses on the role of energy policies that promote renewable energies and have led to significant reductions of nuclear capacities after the Fukushima accident. We find that high electricity infeed from renewable sources increases negative price spike probabilities, while the decommissioning of nuclear plants under the Nuclear Moratorium had an opposing effect. Simulations of market outcomes under different energy policies indicate that reaching ambitious renewable energy targets increases the frequency of low-price events and compromises the financial viability of conventional generation units, while a nuclear phase-out or an increase in storage capacities mitigates these effects. [ABSTRACT FROM AUTHOR]