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Ancillary services markets (ASMs) are gaining higher importance in renewable-based power systems. They, however, remain less explored than the energy markets (EMs) of different regions. For limited energy units, such as battery energy storage systems (BESSs), it is vital to investigate the relative predictability of the two markets as suitable bidding hours of a less predictable product are more challenging to identify, thus entailing less certain revenues. This paper develops forecast models of the two markets of three Nordic countries – Denmark, Finland, and Norway – to quantify the difference in their predictability. Frequency containment normal reserves (FCR-N) are considered as a case of the Nordic ancillary service product. The dataset of 315648 datapoints contains three years (2019 – 2021) of their hourly FCR-N, and spot market revenues. Generalized additive models (GAMs) are used to develop week-ahead forecasts using smooth curves of hourly and daily patterns. The forecast allows both inter country – between same markets of different countries – and intra country – between different markets of the same country – comparison. The results show that the FCR-N markets of the Nordic countries are less predictable than their respective spot markets except for the case of Denmark due to its fixed hourly volumes. Moreover, the smoothing curves of FCR-N forecast models differ for each Nordic country despite their similar market requirements. This is in contrast to the Nordic spot markets where the smoothing curves indicate similarity in inter-country mar-ket behaviors. Considering market predictability differences in addition to their hourly prices is thus vital for BESS units performing multi-market bidding.

We analyse the productivity growth of electricity transmission and distribution networks in Great Britain and how changes in incentive mechanism have influenced the measured total factor productivity. In doing so we are also concerned to examine the effects of quality of service and environmental targets on measured productivity growth. It is increasingly important that productivity measures adjust for the increasing regulatory pressure to reduce the wider societal impacts of the electricity sector and improve quality of service. Failure to do so, may mean that productivity growth may look slower than it actually is. We employ a Data envelopment analysis technique which considers the underlying data without a stochastic element. Our findings show that productivity growth is consistently low for the period we examine, in the region of 1% p.a. over the 29 years from 1990/1991–2018/2019. For both electricity transmission and electricity distribution we try to monetise a wider range of quality and emissions variables in order to show the difference their inclusion makes to measured productivity growth. We show that it can make a difference both positively and negatively, though often this difference is small (e.g. 0.1% p.a.). However, the impact can be much larger (c. 1% p.a.), especially with respect to improvements in quality of service in the distribution network. In the context of generally slow productivity growth, we therefore show the importance of appropriate measurement.

This paper discusses some of the fundamental issues related to the future growth of productivity under net zero climate change policies. The aim of the paper is to discuss just how challenging it will be for an advanced economy with a net zero target to grow total factor productivity. The paper proceeds as follows. We begin by discussing the concept of green growth and a green industrial revolution. The focus of economic development here is on growth with minimal environmental impact. We then relate the green economy to the circular economy. The circular economy emphasises reduced material consumption and increased material recycling. We then discuss GDP measurement and how this relates to productivity growth under climate policies. Finally, we use a worked example of the projected growth under net zero of the electricity sector in Great Britain to show just how challenging raising even maintaining the level of TFP will be in that sector in the years out to 2050.

The paper uses a social cost benefit analysis (SCBA) approach to measure the effects of the power system reform starting from 2015 in Jiangsu province, China. We review the background of Jiangsu power system and summarize the implemented policies since the publication of “Document #9”. Then we pick the average industrial and commercial retail price and analyse the sources of price reductions. We show that the nominal industrial and commercial price fell by 21.3% between January 2012 and May 2021. We then analyse the likely overall welfare change facing industrial and commercial customers using SCBA and conclude that there is a permanent gain equivalent to 9.1% lower prices per year mainly because of the reform. This figure is a significantly more positive consumer gain than that calculated in previous SCBAs of electricity reform in other countries.

The gas industry in Great Britain has witnessed periodic regulatory reviews and large corporate changes over the last few decades. We undertake two separate analyses for the total factor productivity (TFP) of the gas networks using a non-parametric data envelopment analysis (DEA) approach to assess how these changes are impacting on productivity growth. First, we set out different models for the TFP analysis, each for gas transmission and distribution network, to examine how changes in incentive mechanism have influenced the measured TFP using quality of service and environmental targets. Quality standards from regulators warrant some adjustment to explore industry productivity growth. Second, we construct a combined single series for distribution and transmission using financial data to uncover how corporate reorganisations have impacted measured productivity to get a new perspective in the years before and after restructuring, when the industry went from being a single integrated transmission and distribution network to the disintegrated networks of today. We find a negative TFP growth of -1.6% p.a. for gas transmission over the sample period (2006/07-2018/19). Although, this is reversed to a positive growth once quality is included. For gas distribution, we actually find that productivity regress at -6.2% p.a. over the sample period (2006/07-2018/19), with the negative TFP trend observed across all the models, despite the inclusion of quality variables. However, we find a slightly higher TFP growth of 1% using corporate accounts over the 25 years from 1995/1996-2020/2021. The period before restructuring has a more positive productivity compared to the post-restructuring era with negative productivity growth.

This paper seeks to discuss some of the policy implications which arise from the modelling of Net Zero GHG emissions in 2050 within a sector coupling approach. We draw on a major study of the EU-UK energy system in 2050 produced by the Centre for Regulation in Europe (Chyong et al., 2021), which involved stakeholders from both electricity and gas sectors in a year-long modelling exercise of the European energy system. While no model of the future is an accurate forecast, an optimisation model of the Net Zero energy system is very helpful in clarifying the role the modelled technologies might play in a future energy system under binding government policy targets. What our modelling highlights is that the achievement of Net Zero depends on the massive scale up of variable renewable electricity, biomethane, hydrogen and carbon capture and storage (CCS) technologies. Failure to simultaneously scale up these technologies quickly will threaten the ability to achieve the Net Zero target by 2050.

This paper seeks to shed light on the nature of optimal regulation of the electricity distribution system operator (DSO) over the period to 2025 and beyond, following the implementation of the EU Clean Energy Package and its constituent parts: Electricity Regulation (EU) 2019/943 and Electricity Directive (EU) 2019/944. We conducted two parallel surveys of DSOs and their national regulatory authorities (NRAs) across 39 European countries. This produced 39 responses from DSOs and 12 responses from NRAs covering, respectively, 40% and 78% of customers in those countries. We asked both DSOs and NRAs three sets of questions related to: (1) the definition and regulation of the future system operator function of the DSO; (2) lessons learned from transmission system operator (TSO) regulation that can be translated to the DSO; and (3) the way in which regulators support the capacity of the DSO to operate and coordinate the system. Our findings are consistent with the observation that the move towards a more active role for the DSO remains work in progress for both DSOs and their NRAs, given the fact that the Clean Energy Package has only passed into European Law relatively recently and some Member States are still implementing its provisions.

For over three decades, air pollution has been a major environmental challenge in many of the fast-growing cities of the world, including Beijing, China. Given that any long-term exposure to high levels of air pollution has devastating health consequences, accurately monitoring and reporting air pollution information to the public is critical for ensuring public health and safety, while facilitating rigorous air pollution and health-related scientific research. Recent statistical research examining China’s air quality data has posed questions on data accuracy, especially data reported during the Blue Sky Day (BSD) period (2000–2012), even though the quality of publicly available air quality data in China has improved substantially over the recent years (2013–2017). Until now, no attempts have been made to re-estimate the air quality data during the BSD period. In this study, we propose a multi-task machine-learning model to re-estimate the official air quality data during the recent BSD period, from 2008 to 2012, utilizing PM2.5 data reported by the US Embassy in Beijing and proxy data covering Aerosol Optical Depth (AOD) and meteorology. Results have shown that average re-estimated daily air qualities are respectively 56% and 55% higher than the official ones, for air quality index (AQI) and AQI equivalent PM2.5, during the BSD period, from 2008 to 2012. Moreover, the re-estimated BSD air quality data exhibit reduced statistical discontinuity and irregularity. Our novel data re-estimation methodology can be used to provide more credible historical air quality data for evidence-based environmental and public health studies.

China is reforming its electricity supply industry under the guidance of the No.9 document published in 2015. However, such reform has not been supported by new legislation until now. China unveiled an Energy Law draft in April 2020 for public consultatio

What accounts for the recent widespread slowdown in the productivity in advanced economies has remained a puzzle. One plausible explanation has been attributable to regulation, particularly anti-competitive regulations and environmental regulations. This

The recent history of the Electricity Supply Industry (ESI) of major western economies was marked by two fundamental changes: a transition toward liberalised electricity markets and a policy-led push to decarbonise the electricity generation portfolio. These changes not only affected the pace and nature of innovation activity in the sector but also altered the set of innovative actors. The present paper provides a methodology to identify these actors, which we apply to priority patents filed at the UK Intellectual Property Office over the period 1955-2016. The analysis also indicates that (i) the recent increase in innovation activity originates overwhelmingly from upstream Original Equipment Manufacturers and (ii) innovation activity in `green' electricity supply technologies slowed down in recent years.

China's electric power industry has experienced a reform whereby the generation sector is being opened up to competition but the transmission and distribution sectors are still under regulation. Efficiency and benchmarking analyses are widely used for improving the performance of regulated segments. The impact of observable environmental factors, together with unobservable characteristics, on efficiency has gained increasing attention in recent years. This study uses alternative stochastic frontier models combined with input distance functions to measure the productive efficiency of 29 grid firms of China over the period of 1993–2014 and investigates whether the observed environmental and unobserved heterogeneity factors affect the productive efficiency. The results indicate that adverse environmental conditions may bring negative influence to the production of grid utilities while the number of customers and the network length have positive impacts on the utilities' efficiency; Besides, the efficiency is sensitive to the model specification, which illustrates the presence of observed and unobserved heterogeneity; Moreover, there is no significant efficiency improvement in the grid utilities after the unbundling reform of 2002; Finally, the regional grids differ significantly in efficiency, and there is room for improvement, which could be achieved by incentive regulation taking due account of environmental heterogeneity.

Decarbonising electricity is a critical first step in mitigating climate damage but low/zero-carbon generation is very capital intensive. Its cost depends critically on the weighted average cost of capital (WACC). Three factors combine to make a low WACC both desirable and feasible in the UK. First, the Stern Report argues for a low social discount rate (1.4% real) for investments in climate mitigation. Second, global and UK real interest rates have been falling steadily - UK gilt index-linked 20-year rates have fallen from +4% in 1995 to -2% (negative) in 2019. CCS and nuclear have long lifetimes over which to recover their capital cost, longer than commercial finance would accept without guarantees, in contrast to renewables where off-take contracts have proven sufficient. Nuclear power faces the additional investment challenge of lengthy uncertain construction. No nuclear plant has ever been built privately without substantial regulatory guarantees. The Regulated Asset Base (RAB) model can address these financing problems for long-lived low-carbon assets. The benefits of placing risk on developers to motivate cost control are small compared to the extra costs of a higher weighted average cost of capital (WACC). A hybrid RAB model (like that used for the Thames Tideway Tunnel)—with excess cost sharing and a cost cap—can reduce risk to deliver an adequately low WACC by accessing infrastructure funds that do not require extensive specialised project knowledge. If the risk of excess costs is spread over the 27 million households and other customers taking two-thirds of electricity, each would bear minimal risk and the cumulative cost would be significantly lower. The levelized cost at the WACC (3.5% real) is £53/MWh if on time and budget, which should be compared with a counterfactual in which all the risk is placed on the company requiring a contract-for-difference with a strike price of £96/MWh for the life of the project (equal to the levelized cost). The levelised cost to consumers if on time and budget would be £50/MWh and in the worst case with a 48% cost over-run, £64/MWh.

The European Union (EU) Single Market came into existence on 1 January 1993, with the aim of bringing down barriers and simplifying existing rules so that there is the free movement of goods, capital, services, and labour—the so-called “four freedoms”—within the European Union (see Fig. 1). Over the last 25 years it has grown from 345 million citizens to about 510 million, and the number of its participating EU Member States has more than doubled: from 12 to 28 (see Table 1). In addition: Norway, Iceland, and Liechtenstein almost fully participate in the EU Single Market.

This paper reviews digitalisation in energy sector by looking at the business models of 40 interesting new start-up energy companies from around the world. These start-ups have been facilitated by the rise of distributed generation, much of it intermittent in nature. We review Artificial Intelligence (AI), Machine Learning, Deep Learning and Blockchain applications in energy sector. We discuss the rise of prosumers and small-scale renewable generation, highlighting the role of Feed-in-Tariffs (FITs), the Distribution System Platform concept and the potential for Peer-to-Peer (P2P) trading. Our aim is to help energy regulators calibrate their support new business models.

Using a Pan-European electricity dispatch model we find that with higher variable renewable energy (VRE) production wholesale power prices may no longer serve as a long-run signal for generation investment in 2025. If wind and solar are to be self-financing by 2025 under the current European market design, they would need to be operating in circumstances which combine lower capital cost with higher fossil fuel and/or carbon prices. In the absence of these conditions, long term subsidy mechanisms would need to continue in order to meet European renewable electricity targets. More VRE production will exacerbate the ‘missing money’ problem for conventional generation. Thus, closures of unprofitable fossil fuel generation would sharpen and increase energy-only prices but would put more pressure on ancillary services markets to support system stability. Thus, the question of the need for a market redesign to let the market guide investments in both renewables and conventional generation would seem to remain.

© 2019 Elsevier B.V. This paper explores links between self-control in decision-making and self-disconnection by households using energy prepayment meters. Self-disconnection happens when households exhaust all available credit in their meter and are left without a supply of energy because they have been unable to top up. This has serious consequences for the well-being of households and also increases firms' costs. We explore behavioural characteristics associated with self-disconnection and present saving plans to help households minimise self-disconnection. We show that, in our sample, stated self-disconnection is positively associated with lower levels of goal achievement. We also show that households which have already experienced self-disconnection are more likely to accept an energy savings plan. It is relevant and promising that these households tend to select saving plans most likely to minimise their likelihood of self-disconnection. Our findings give some useful insights for energy policy-making, both for policy-makers interested in alleviating energy poverty and for energy utilities keen to limit self-disconnection.

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.

Over the last three decades, air pollution has become a major environmental challenge in many of the fast growing cities in China, including Beijing. Given that any long-term exposure to high-levels of air pollution has devastating health consequences, accurately monitoring and reporting air pollution information to the public is critical for ensuring public health and safety and facilitating rigorous air pollution and health-related scientific research. Recent statistical research examining China’s air quality data has posed questions regarding data accuracy, especially data reported during the Blue Sky Day (BSD) period (2000 – 2012), though the accuracy of publicly available air quality data in China has improved gradually over the recent years (2013 – 2017). To the best of our understanding, no attempt has been made to re-estimate the air quality data during the BSD period. In this paper, we put forward a machine-learning model to re-estimate the official air quality data during the BSD period of 2008 – 2012, based on the PM2.5 data of the Beijing US Embassy, and the proxy data covering Aerosol Optical Depth (AOD) and meteorology. Results have shown that the average re-estimated daily air quality values are respectively 64% and 61% higher than the official values, for air quality index (AQI) and AQI equivalent PM2.5, during the BSD period of 2008 to 2012. Moreover, the re-estimated BSD air quality data exhibit reduced statistical discontinuity and irregularity, based on our validation tests. The results suggest that the proposed data re-estimation methodology has the potential to provide more justifiable historical air quality data for evidence-based environmental decision-making in China.

In this paper, we begin by discussing the components of the price of industrial electricity in Great Britain, as an example of a fully reformed electricity market, where the market is roughly comparable in size to a reasonably large Chinese province. We go on to discuss the key actors in the liberalized electricity system in Great Britain, before unpacking each of the components of the price. We discuss the market determined elements first, then go on to introduce and discuss the regulated elements of the price before finishing with the central government determined price components. Our discussion covers the determination of the wholesale price, the retail margin, transmission charges, system balancing charges, distribution charges and environmental levies and taxes. In each of these cases we discuss the process by which they are determined (led by the market, the regulator, the central government or more than one) and the specific lessons for China. We conclude by emphasizing some of the high-level lessons on electricity price determination for China.

This paper explores the international experience in the procurement of reactive power and related electricity ancillary services. It involves system operators from different jurisdictions including Australia, the United States and Great Britain. The paper evaluates the different procurement mechanisms and related compensation schemes. In addition, it also appraises a novel approach (from the Power Potential initiative in the UK) for contracting reactive power services from distributed energy resources (DERs) using a market-based mechanism. The conceptual auction design applicable to the procurement of reactive power is also discussed. Our findings suggest that competition in reactive power is very limited in comparison with other ancillary services such as frequency regulation and capacity reserves. The introduction of more market oriented mechanisms for acquiring reactive and active power services by the system operator opens new opportunities and new ways to deal with voltage stability issues. Power Potential trails a technical and commercial solution, new market roles and the new interactions required in the introduction of a competitive reactive power market.

In light of the increasing importance of distributed energy resources (DERs) in the electricity system, there is an ongoing need to understand the current status of electric power distribution across the world. This review paper compiles key information about the distribution systems in 175 countries worldwide. The findings for each country include the number, legal structure and ownership of distribution system operators, the access to electricity they provide, distribution level voltages, electric power frequency and the significance of renewable electricity generation. This study covers 99.4% of the world’s population. As of June 2018, there are around 7600 distribution system operators in these 175 countries. After reviewing today’s distribution system status, this paper also reviews the various discussions and proposals for tomorrow’s electric power distribution. The discussion covers both system operation and market platform roles as well as data management options for DSOs in the near future.

Globally coordinated climate action has resulted in sub-optimal emissions reductions and unilateral (second-best) climate policies have so far provided the bulk of emissions reductions. This paper argues that the development of new unilateral carbon pricing policies was fostered by international signalling and technological spillover effects. The strength of both effects hinges, for each jurisdiction, on trade relations with other CO2-abating jurisdictions. We provide a stylised theoretical discussion in support of our proposition and investigate it using data on a panel of 121national jurisdictions over the period 1990-2014. Results show a strong positive association between import-weighted exposure to CO2-pricing partners and domestic environmental policy. The analysis also supports the technological spillover channel: trade-weighted installed capacity of wind and solar energy seems to prompt implementation of and more stringent carbon pricing policies.

The aim of this paper is to evaluate different well-established non-electrical storage markets (gas, frozen food and cloud storage) in order to identify relevant lessons for electrical energy storage (EES) connected to the electricity distribution networks. The case studies that have been evaluated are Centrica Storage (gas storage), Google Drive (cloud storage) and Oakland International (frozen food storage). A specific business model methodology has been selected for comparing the different business model components across these sectors. The methodology (following Johnson et al., 2008) refers to key interconnected components: customer value proposition, the revenue formula, key resources and key processes. The evaluation of the three case studies suggests that well-developed business models already exist in growing and mature storage markets. Regulation also plays an important role across the different storage markets and business model components, how-ever its importance varies depending on the type of market. Innovation in storage business models is also observed (technological and contractual) which should be also facilitated in EES. Innovation helps move markets towards more sustainable business models.

This paper examines power sector reform in China�s largest province, Guangdong, following the publication of the No.9 document of the China State Council on �Deepening Reform of the Power Sector� in March 2015. We look at the operation of the pilot wholesale power market in Guangdong in the light of international experience. We discuss how the power market pilot is working in Guangdong and the extent to which the current market design is in line with successful power markets we see elsewhere. We examine the evidence on whether the market reform has successfully brought new players into the electricity system in Guangdong. We consider the effects of the reform on the operational and investment decisions of firms in the sector. We conclude with several lessons for the Chinese government�s ongoing power sector reform programme.

This study explores the international experience with independent system operators (ISOs) with respect to the incentives that system operators face to operate the electricity network efficiently (from the point of view of society). We look for lessons that we can learn from this experience for the future regulation of the Great Britain (GB) System Operator (National Grid Electricity Transmission). We examine seven ISOs from the USA, where the model seems to be successful but with some cost issues within the system operator itself. We also examine system operators from Australia (AEMO), Chile (SIC/SING) and Peru (COES). Our findings are supported by a short survey that was sent directly to our contacts in the system operators from our sample of ISOs. Against a background of rising distributed renewable generation on the electricity system, we discuss the international experience of ISOs with respect to their incentives to: maximise social welfare; manage the increasing amount of renewables and new participants; manage their overall actions for customers; engage in stakeholder participation and transparency.

The goal of this research is to trigger the devolution of the system balancing responsibility entirely belonging to the transmission system operator (TSO) to several local distribution system operators by fairly allocating system balancing cost based on a cost-causality principle. Within the devolved system balancing scheme, distribution system operators (DSOs) have appropriate motivation for reducing the variability and uncertainty caused by units in their own area. As the number of renewable electricity sources (RES) being connected to the local distribution system increases, it would be advantageous for the TSO to share the increasing burden of the system balancing responsibility with multiple DSOs. To achieve this, we suggest that, first DSOs be designated as the representatives of their own jurisdictions with primary economic responsibility for balancing payments that are originally charged to each energy market participant. Second, this research proves that a cost-causality based cost allocation scheme(CC-CAS) is superior to an energy-amount based cost allocation scheme (currently widely used) in terms of economic efficiency. Additionally, to avoid the side effect that a DSO with a large amount of RES may face a high and risky balancing payment under the CC-CAS, this research also proposes an optimal balancing payment insurance (BPI) contract which helps the DSO hedge the risks associated with uncertain balancing payments.

This study explores and quantifies the social costs and benefits of grid-scale electrical energy storage (EES) projects in Great Britain. The case study for this report is the Smarter Network Storage project, a 6 MW/10MWh lithium battery placed at the Leighton Buzzard Primary substation to meet growing local peak demand requirements. This study analyses both the locational and system-wide benefits to grid-scale EES, determines the realistic combination of those social benefits, and juxtaposes them against the social costs across the lifecycle of the battery to determine the techno-economic performance. Risk and uncertainty from the benefit streams, cost elements, battery lifespan, and discount rate are incorporated into a Monte Carlo simulation. Using this framework, society can be guided to cost-effectively invest in EES as a grid modernization asset to facilitate the transition to a reliable, affordable, and clean power system.

This paper discusses the principles of electricity network charging in the light of increasing amounts of distributed generation and the potential for significant increases in electric vehicles or distributed electrical energy storage. We outline cost reflective pricing, traditional public service pricing, platform market pricing and customer-focussed business model pricing. We focus on the particular problem of how to recover network fixed costs and a recent example from Australia. We conclude that there are serious issues for regulators to address, but that potential solutions at the distribution level may already exist at the transmission level.

The literature shows that for most UK industries privatization might be necessary but is not sufficient to produce economic benefits. Often prior changes in management or later changes in market structure and regulation have larger impacts than privatization itself. We ask what changes around privatization had the greatest impact on efficiency for UK electricity generators. We analyse the effects of privatization and other changes in incentives on plant efficiency using a newly compiled unbalanced panel of about 60 plants for the years 1980 to 2004. We measure efficiency as input demands for two standard inputs, fuel and labour as well as three air emissions, CO2, SO2, and NOx. We model the change in efficiency as a single intercept break and allow for the break to occur at an unknown date. Inference for breaks and break dates relies on Quandt-Andrews type tests. We find breaks associated with efficiency increases for fuel and labour. Breaks and efficiency changes for the three emissions are generally related to fuel efficiency privatization. Efficiency increases first for labour and later for fuel. We conclude that electricity privatization like other UK privatizations was a unique event. Privatization was important to prepare the ground but it seems that only the subsequent restructuring of the industry, the reduction of political interference in fuel choice, and investment in new and more efficient generation technologies increased efficiency.

Competition increases firms performance. But in many industries, especially network based industries, effective competition requires the separation of firms. Separation can lead to a trade-off between technical efficiency gains from competition and losses from separation. But separation itself can be beneficial, too. We estimate the combined effect of competition and vertical separation (as well as the individual effects) for the case of US electric utility divestitures. We analyse the difference-indifference in inefficient costs between divested units and non-divested units in either restructuring or non-restructuring states. We find that for our benchmark model of technology the combined effect is virtually zero. We analyze the uncertainty about the unobserved true technology and find that this number constitutes the lower bound whereas the upper bound is $24 billion. Generally, the effect of separation itself is much larger than the effect of competition. Also, the effect of separation is positive for most models of the technology.

This paper examines the economics of the electricity market out to 2050. We propose a flexible zoning concept, built up around economic and technical layers, in networks of the order of hundreds of thousands or millions of nodes. The Economic Layer runs auctions to determine the electricity to be delivered and prices. The Economic Layer delivers suggestions after a fixed ordering, starting with suppliers and demands that generates the lowest overall system cost, then second-lowest overall network cost etc. These suggestions are delivered to the Technical Layer that checks for feasibility in terms of technical constraints. The first match between the ranked suggestions and non-violation of technical constraints is chosen. We demonstrate why this paper should be considered for future power systems. This paper extends previous work on reactive power exchange by introducing market considerations in zoning mechanisms for active power exchanges. We are also exhibit the potential for much higher price resolution in distribution networks via our concept of economic zoning.

Auction designs in current electricity markets will need to be adjusted to cope with massively increased small-scale distributed generation and demand response, as these are integrated into the electricity system. We present a VCG mechanism that addresses the two most important challenges facing future power systems, namely uncertainty of costs and complexity of bidding strategies. The mechanism is built up around heterogeneous goods, useful for different levels of response time of electricity or different Quality of Service agreements, package bidding and a proxy agent. The proxy agent will ensure optimal bids from non-professional suppliers. Our mechanism has the expected desirable properties by design.

Many studies of the water and sewerage industries place significant importance on the benefits of economies of scale and scope and how these relate to vertically integrated firms. We have re-examined the early literature on scale and scope economies and find that these studies do not implicitly preclude non-integrated firms from fully utilising assets for multi-product activities; they can still reap scope economies through trading in the open market. Further, we demonstrate difficulties in separating these two types of economies when assessing firm performance. Trade-offs between governance and production costs are a key issue in determining the value of vertically integrated firms that may undergo divestiture. We discuss the present policy debate regarding the optimal structure of the water and sewerage markets in England and Wales in the light of this, and recommend avenues of research that will help determine the optimal policy.

This paper considers the heterogeneity of household consumer preferences for electricity service contracts in a smart grid context. The analysis is based on original data from a discrete choice experiment on smart electricity service contracts that was designed and conducted in collaboration with Accent and 1,892 UK electricity consumers in 2015. The results suggest that while customers are willing to pay for technical support services, they are likely to demand significant compensation to share their usage and personally identifying data and to participate in automated demand response programs. Based on these findings potential platform pricing strategies that could incentivise consumers to participate in a smart electricity platform market are discussed. By combining appropriate participation payments with sharing of bill savings, service providers could attract the number of customers required to provide the optimal level of demand response. We also examine the significant heterogeneity among customers to suggest how, by targeting customers with specific characteristics, smart electricity service providers could significantly reduce their customer acquisition costs.

Multiple market drivers suggest that electrical energy storage (EES) systems are going to be essential for future power systems within the next decade. However, the deployment of the technology is proceeding at very different rates around the world. Whereas the sector is progressing quickly in California, it is not gaining much traction, so far, in Europe. This research aims to clarify why the prospects for energy storage in Europe are not as good as they are in California. The market and regulatory framework in California and Europe are analysed critically, and changes to overcome the main barriers are recommended. The research shows that the main barriers are: inadequate definition and classification of EES in legislation; lack of markets for some ancillary services; inadequate market design that benefits traditional technologies; and the lack of need for EES in some jurisdictions. The prospects are better in California because regulation is more advanced and favourable for the technology, and regulators are collaborating with developers and utilities to analyse barriers and solutions for the technology. In Europe, there is a need to clarify the definition of EES, create new markets for ancillary services, design technology-neutral market rules and study more deeply the necessity of EES.

Energy storage seems set to play a key role in managing and balancing the future electricity system. Storage can act as a generator and as a load, providing both energy and ancillary services such as fast frequency response and operating reserve. Therefore, it can provide the desired flexibility for the network. Current mechanism designs do not take advantage of the full potential of a given storage facility and the auctions used to buy and sell potential storage products have design flaws. This paper gives an overview of how storage products are bought and sold today and the problems of the current designs. It then presents a new mechanism design to integrate storage in the most efficient way, based on social welfare.

Improving the efficiency and performance of the UK residential sector is now necessary for meeting future energy and climate change targets. Building Performance Evaluation and Certification (BPEC) tools are vital for estimating and recommending cost effective improvements to building energy efficiency and lowering overall emissions. In the UK, building performance is estimated using the Standard Assessment Procedure (SAP) for new dwellings and Reduced SAP (RdSAP) for existing dwellings. Using a systems based approach we show there are many opportunities for improving the effectiveness of BPEC tools. In particular, if the building stock is going to meet future energy and climate change targets the system driving building energy efficiency will need to become more efficient. In order to achieve this goal, building performance standards across Europe are compared highlighting the most effective strategies where they are found. It is shown that the large variance between estimated and actual energy performance from dwellings in the UK may be preventing the adoption of bottom-up energy efficiency measures. We show that despite popular belief, SAP and RdSAP do not estimate building energy efficiency but instead attempt to estimate the cost-effective performance of a building and thus create perverse incentives that may lead to additional CO2 emissions. In this regard, the SAP standard confounds cost-effectiveness, energy efficiency and environmental performance giving an inadequate estimate of all three policy objectives. Important contributions for improving measurement, analysis, synthesis and certification of building performance characteristics are offered., Efficiency

This paper examines the lessons from independent transmission system operators in energy in the context of the potential introduction of an independent system operator in the water sector. A key lesson from the energy sector is that there is a basic choice between having an independent system operator (ISO) and an independent transmission system operator (ITSO) covering two or more existing company areas. ISOs do not own any wires or pipes, ITSOs do own wires or pipes. We begin by examining the nature of system operation arrangements in different countries, focussing on different ways that non-discriminatory access to monopoly transmission assets can be facilitated. We go on to discuss the particular functions of the ISO, focussing on the US, with regard to controlling the system and operating the power markets. We also detail the costs of system operation. Next, we focus on incentive issues and the governance of ISOs around the world. We outline an ideal model for an electricity system operator and examine the extent to which systems in the US and UK conform to the ideal. We also explore the issue of pricing access to the system and how system operation costs are paid for. Then, we look at the evolving role of system operators and how they might be evaluated. Finally we apply the learning from system operation in energy across to the UK water sector and offer some interim conclusions.