Why (and how) to regulate power exchanges in the EU market integration context?

The European Union (EU) market integration is leading to increasingly monopolistic electricity market infrastructures, which has opened a debate on the regulation of these so-called power exchanges. In this paper, we start by stating that there are two types of power exchanges in Europe, i.e. “merchant” and “cost-of-service regulated” power exchanges. We then discuss how regulation can be used to better align their incentives with the main power exchange tasks. We conclude that adopting the cost-of-service regulated model for all power exchanges in Europe could be counterproductive in the current context, but that regulation can help ensure that the benefits of the EU market integration materialize. Promising regulatory actions include tempering the reinforced market power of power exchanges, and quality-of-service regulation for the ongoing cooperation among power exchanges to organize trade across borders.     

Vertical integration and market power: A model-based analysis of restructuring in the Korean electricity market

An agent-based simulation model is developed using computational learning to investigate the impact of vertical integration between electricity generators and retailers on market power in a competitive wholesale market setting. It is observed that if partial vertical integration creates some market foreclosure, whether this leads to an increase or decrease in market power is situation specific. A detailed application to the Korean market structure reveals this to be the case. We find that in various cases, whilst vertical integration generally reduces spot prices, it can increase or decrease the market power of other market generators, depending upon the market share and the technology segment of the market, which is integrated, as well as the market concentrations before and after the integration.     

Large-scale wind power in European electricity markets: Time for revisiting support schemes and market designs?

This paper questions whether current renewable support schemes and electricity market designs are well-suited to host a significant amount of wind energy. Our analysis aims at finding the right equilibrium between market signals received by wind generators and their intrinsic risks. More market signals are needed to give the right incentives for reducing wind integration costs but should not undermine the effectiveness of support schemes. Although several alternatives combining support schemes and market signals could improve the current situation in terms of market signals and risks, feed-in premium support scheme seems actually to be the more balanced option. Furthermore, an adequate sharing of wind generation technical responsibility between the system operator and wind power producers can help to control wind integration costs even in the absence of accurate market signals.     

The integration of China into the world crude oil market since 1998

The integration of China into the world oil market is an important issue for at least two reasons. First, the influence of the country on the world oil market is dependent on the level of the integration. Second, integration into the world oil market means that China is opening itself up to potential disturbances in the world market and this leads to significant energy security concerns for the country. The aim of this paper is to investigate whether or not China is an integral part of the world oil market. By reviewing the relevant trade and pricing policies of the Chinese government as well as the behavior of the Chinese national oil companies, we find that China is actively engaging itself in the world oil market. Our time-series results show that the Chinese oil price is cointegrated with the major oil prices in the world and a high degree of co-movement between the prices is found. Causality between the price pairs is found to be bi-directional in most cases. The empirical results suggest that China is now an integral part of the world oil market.     

Commodities risk premia and regional integration in gas-exporting countries

This study examines the fundamental driving forces of stock market integration with particular emphasis on major Gas-Exporting Countries (hereafter known as GECs), namely the United Arab Emirates, Qatar, Venezuela, Saudi Arabia, Russia, and Kuwait, over the period from June 2003 to November 2017. The novelty of our study stems from the fact that we examine a dynamic process of international, regional and national stock markets integration using a set of local, regional, global and commodities as driving forces of integration. Particularly, we measure market integration using gas price as a common source of risk in addition to the world, regional and domestic sources of risk based on a conditional version of the International Capital Asset Pricing Model (ICAPM). Our study also differs from past ones in that we investigate the integration of stock markets into the international market as well as in the GECs countries. Our results show that the level of market integration of the major gas-exporting countries varies widely over time and depends on the interest rate spread, the level of market openness and market volatility. It also seems to be still significantly segmented from both the global and GECs markets. Gas risk represents a small part of the global risk in all the countries considered in this study.     

An assessment of the Italian smart gas metering program

The introduction of smart metering is one of the core elements in recent European policies targeting environmental sustainability and competitiveness of energy markets. Following the roll-out of smart electricity meters, in 2008 the Italian regulator designed an ambitious deployment program also for smart gas meters, that was recently modified in both scope and timing.This paper assesses Italy's original and current deployment plans, with a specific focus on the results of its cost–benefit analysis. In light of the evidence derived from the literature, we observe that the case for the roll-out of smart gas meters in Italy was not supported by a strong emphasis on energy savings but rather focused on increasing efficiency of the Italian gas market; in this respect, we argue that options other than smart gas metering should also be considered. Moreover the Italian cost–benefit analysis, which mostly dealt with the potential cost savings for distributors and suppliers, led to ambiguous results in terms of net present values; thus, we believe that an updated assessment would be extremely useful. Finally, in terms of technological choices, our analysis positively evaluates the regulator's recent proposal to consider a dual-fuel solution for the mass market deployment.     

Modelling and optimization of district heating and industrial energy system—an approach to a locally deregulated heat market

Regions with densely concentration of industries and district heating systems (DHS) could be interesting study object from the light of an integrated heat market on local basis. System analysis with a widened system boundary could be used as an approach to evaluate the benefit of an integrated heat supply system. In this study, an energy system model consisting of totally seven different participants is designed and the optimization results of the system analysis are presented. With applied data and assumptions, the study shows that a significant amount of the heat demand within two sub‐systems can be covered by heat supply from the heat market (the entire heat comes from two industries). Shadow prices, which can be used for heat pricing, indicate the advantage of an integrated system. The system cost reduction through integration and the availability of several actors with diverse energy supply system, makes the region under study an interesting area to prove a locally deregulated heat market. Copyright © 2004 John Wiley & Sons, Ltd.     

Integration reforms in the European natural gas market: A rolling-window spillover analysis

This paper revisits the topic of natural gas market integration across Europe. Against the backdrop of three EU gas directives aimed at creating competition and strengthening market connections, and the move towards hub trading and gas-on-gas pricing in the European markets, we adopt and extend the spillovers index due to Diebold and Yilmaz (2009) to examine the path of market connectivity over the period between 2005:7–2018:12. An initial estimation uncovers what might be deemed a ‘clunky’ evolution in the spillover index. We identify the cause of this, and devise a tilted ‘importance weighting based re-sampling’ rolling window estimation strategy which preserves the underlying evolutionary trend without overly weighting the importance of historic outliers. Our results show that although there are periods of deterioration, the level of market connectivity recovers, producing a generally increasing trend of market integration in our sample period. The connectivity index peaks at around 65%, i.e. a little above halfway through to full connectivity. We conclude that the European natural gas market has achieved a non-trivial, albeit not full, level of integration to-date.     

Marginal cost and congestion in the Italian electricity market: An indirect estimation approach

In this paper we construct an indirect measure of the supply marginal cost function for the main generators from the observed bid data in the Italian electricity market in the period 2004–2007. We compute the residual demand function for each generator, taking explicitly into account the issue of transmission line congestion. This procedure allows recovering correct zonal Lerner index and the implied measure of the marginal cost function. We find evidence of a stable U-shaped marginal cost function for three main Italian generators, but a flat function for ENEL, the former national monopolist. The policy relevance of our approach lies in the possibility to offer some empirical knowledge of the marginal cost function of each generator to the regulator to design appropriate policy measures geared to the promotion of competitive market conditions. We propose a new market surveillance mechanism, which is based on the principle of sanctioning excessive deviations from the estimated measure of the marginal cost function presented in this work.     

拍卖法对京津冀碳市场一体化的影响

依据国家原定计划,2020全国统一的碳市场将进入运行阶段。受新冠疫情及相关因素影响,现阶段全国碳市场的全面建成与充分使用仍然难以一蹴而就。京津冀碳市场一体化建设是全国统一碳市场建设的关键。研究主题为京津冀碳市场一体化:一是以超越对数生产函数为理论工具,运用岭回归数据分析方法,分析测算2001-2015年京、津、冀地区的碳配额影子价格,并预测2025年不同拍卖比例下三地区的碳配额影子价格;二是依据冰川模型思想,以碳配额不同拍卖比例下的影子价格为基础数据,分析测算出京津冀碳市场一体化指数。研究结论显示,随着碳配额拍卖比例由1%到10%,2025年京津地区的碳配额市场一体化程度有逐步降低趋势,京冀和津冀区域有逐步上升趋向。     

Do manufacturing firms react to energy prices? Evidence from Italy

The reaction of energy demand to price changes is a key policy issue as it describes the economy's response to changes in market conditions or to policy interventions. The issue is even more important for the Italian economy, highly exposed to energy price changes, given its almost complete fossil fuel-related energy dependence, environmental sensitivity and highly fragmented industrial structure. Besides the policy issue, there is also an important methodological debate, concerning the best way to evaluate energy demand elasticities, looking at alternative models, data and elasticity definitions. After a discussion of the main methodological issues and the related empirical literature, this paper presents an estimation of factor and fuel demand elasticities for Italian industrial firms, by using a microeconomic panel in a two-stage translog model. Using cross-price and Morishima elasticities, we obtain information on the magnitude and asymmetry of firms' responses to price changes. Moreover, the use of a micro-dataset allows the high heterogeneity of Italian firms to be considered: the results are discussed according to technology intensity, sector and firm size. Our findings show that energy is the most elastic input for all sectors and that capital and energy are substitutes in the low technology sector and weak complements in all others. Estimated interfuel elasticities show a high degree of demand sensitivity to fuel price changes and the vast majority of cross-price elasticities exhibit substitutability. Appropriate fiscal policies can thus be identified to give an effective impulse in influencing the industrial energy mix by changing relative prices. These findings constitute an important foundation for analysing energy demand by Italian industrial firms, given that empirical literature is particularly rare on the Italian case study.     

Programs and perspectives on photovoltaics in Italy

Photovoltaics (PV) has a high priority in the Italian program on alternative energy sources, because of its innovative technological features and because of its general positive environmental compatibility. In a long term perspective, PV conversion is expected to become an integrative energy source which could supply a substantial share of Italian electrical requirements. At present, high costs are the main limiting factor of the diffusion of PV technology. Costs can be reduced through the joint effects of technological innovation and mass production: therefore, the Italian strategy consists in promoting the gradual enlargement of production volumes and, at the same time, the introduction of less expensive technologies and processes, as soon as they become available. The main responsibility for PV strategies and activities is assigned to ENEA, the Italian National Commission for Nuclear and Alternative Energy Sources. The current ENEA five year plan (1985 – 1989) has allocated about US $ 100 million in the PV sector and, as a result, today ENEA is the main national organization promoting PV energy development. ENEA programs concern the whole PV production process, from raw materials to complete systems, and include both in-house research and external activities, carried out in cooperation with industrial firms, Universities, the National Research Council and other research institutions. Finally, market enlargement is pursued by ENEA through the promotion of demonstration systems, both in stand-alone and grid-connected configurations.     

Strategic investment in merchant transmission: The impact of capacity utilization rules

In this paper we look at the relative merits of two capacity utilization regimes in the merchant electricity transmission network: Must offer (Mo) where the entire capacity installed has to be made available for transmission and Non Must Offer (NMo) where some capacity could be withheld. We look at two specific cases: (i) demand for transmission varies across time, and (ii) vertical integration is allowed between investors in transmission network and electricity generators. In the case of time-varying demand under Mo, we find that a monopolist may underinvest in transmission when compared to NMo, although NMo may lead to more capacity withholding. In the case of vertical integration, we find that when the market power is with the generators of the exporting node, without vertical integration no welfare-enhancing merchant investment would occur, neither under Mo nor NMo. Further, if the generators in the importing node have market power, in case vertical integration is allowed, Mo is better than NMo. Finally, we also argue that the incentive to collude among various transmission network investors is mitigated with Mo in place.     

The dark side of the sun: How solar power production affects the market value of solar and gas sources

Using daily data for the Italian wholesale day-ahead power market over the period 2008–2013, we assess the impact of solar production on the market value of solar and gas sources, defined using the concepts of value factor and unit revenues. We find that, on average, solar generation negatively affects the solar source market value, causing a departure from the grid parity condition and mining their competitiveness once public incentives are removed. This negative relation is not constant over time and becomes stronger for increasing solar penetration in the energy mix. Interestingly, the opposite is found when looking at gas. While the relation between solar production and the gas market value is negative or not significant when the former is low, it turns positive for higher levels of solar production. This is the result of a change in gas producers' bidding strategies. Indeed, in the Italian power market the highest hourly price has shifted from the peak daytime, when solar production is concentrated, to the off-peak nighttime, when solar is absent from the market and gas can exploit temporary market power.     

Investigation on wood pellet quality and relationship between ash content and the most important chemical elements

During the past four years, the European wood pellet market is currently continuing to increase. Total European consumption was about 9.8 Tg and Italian market reaches almost 1 Tg mainly for domestic supply. The present investigation provides an evaluation of pellet quality of Italian market by analysis of 88 wood pellet samples acquired randomly and directly from the sale points. Particular attention has been dedicated to relationship between ash and some elements. Results highlight that only half of samples fulfil the A1 class (best quality) requirements established in the EN 14961-2. Statistical analysis pointed out that ash content is mainly linked to sulphur, potassium and chlorine. The results show that low limit threshold values for ash content ensure low chlorine and sulphur contents.     

Exergoeconomic machine-learning method of integrating a thermochemical Cu–Cl cycle in a multigeneration combined cycle gas turbine for hydrogen production

Integrating new technologies into existing thermal energy systems enables multigenerational production of energy sources with high efficiency. The advantages of multigenerational energy production are reflected in the rapid responsiveness of the adaptation of energy source production to current market conditions. To further increase the useful efficiency of multigeneration energy sources production, we developed an exergoeconomic machine-learning model of the integration of the hydrogen thermochemical Cu–Cl cycle into an existing gas-steam power plant. The hydrogen produced will be stored in tanks and consumed when the market price is favourable. The results of the exergoeconomic machine-learning model show that the production and use of hydrogen, in combination with fuel cells, are expedient for the provision of tertiary services in the electricity system. In the event of a breakdown of the electricity system, hydrogen and fuel cells could be used to produce electricity for use by the thermal power plant. The advantages of own or independent production of electricity are primarily reflected in the start-up of a gas-steam power plant, as it is not possible to start a gas turbine without external electricity. The exergy analysis is also in favour of this, as the integration of the hydrogen thermochemical Cu–Cl cycle into the existing gas-steam power plant increases the exergy efficiency of the process.     

Assessing the value of pulp mill biomass savings in a climate change conscious economy

Pulp mills use significant amounts of biofuels, both internal and purchased. Biofuels could contribute to reach greenhouse gas emission targets at competitive costs. Implementing process integration measures at a pulp mill in order to achieve pulp production with less use of energy (biofuels) has not only on-site consequences but also off-site consequences, such as substitution of fossil fuels elsewhere by the saved pulp mill biofuels, and less on-site electric power generation. In this paper a method, a linking model, is suggested to analyse pulp mill biofuel saving measures when carbon dioxide (CO₂) external costs are internalised. The linking model is based on equilibrium economics and links information from CO₂ constrained energy market future scenarios with process integration measures. Pulp mill economics and marginal energy market CO₂ response are identified. In an applied study, four process integration measures at a Swedish pulp mill were analysed using five energy market future scenarios emanating from a Nordic energy model. The investigated investment alternatives for biofuel savings all result in positive net annual savings, irrespectively of the scenario used. However, CO₂ emissions may increase or decrease depending on the future development of the Nordic energy market.     

Feed-in tariffs for promotion of energy storage technologies

Faster market integration of new energy technologies can be achieved by use of proper support mechanisms that will create favourable market conditions for such technologies. The best examples of support mechanisms presented in the last two decades have been the various schemes for the promotion of renewable energy sources (RES). In the EU, the most successful supporting schemes are feed-in tariffs which have significantly increased utilisation of renewable energy sources in Germany, Spain, Portugal, Denmark and many other EU countries. Despite the successful feed-in tariffs for RES promotion, in many cases RES penetration is limited by power system requirements linked to the intermittency of RES sources and technical capabilities of grids. These problems can be solved by implementation of energy storage technologies like reversible or pumped hydro, hydrogen, batteries or any other technology that can be used for balancing or dump load. In this paper, feed-in tariffs for various energy storage technologies are discussed along with a proposal for their application in more appropriate regions. After successful application on islands and outermost regions, energy storage tariffs should be also applied in mainland power systems. Increased use of energy storage could optimise existing assets on the market.     

Comparison between a micro reactor with multiple air inlets and a monolith reactor for oxidative steam reforming of diesel

In order to lower the emission from idling heavy-duty trucks auxiliary power units can be implemented. Due to limited space available on-board the truck the units needs to be both efficient and compact. One alternative for these units is a fuel cell supplied with hydrogen from a fuel reformer. Today, mostly monolithic reactors are used in the field of oxidative steam reforming of fuels, which has some challenges that need to be addressed before a possible breakthrough occurs on the market. One is the temperature gradient developed over the length of the monolith as a consequence of the sequential reactions. This could be improved by using a metallic micro reactor with better heat integration between the reaction zones and further improving the integration with multiple air inlets along the catalytic bed.     

英、美、日电力改革之借鉴

世界各国的电力市场化改革还处于不断探索阶段。目前国际上还设有一个公认的完美的电力市场模式可以适用于各国不同的国情和电网的实际情况。在世界各国的电力市场改革中,英国采用了自上而下的纵向分离的电力市场改革模式;美国采用了更接近于自然历史过程的纵向整合电力市场改革模式;日本则采用了引入有限竞争的单一买家电力市场改革模式。我国的电力市场改革才刚刚起步,英、美、日电力市场的运行实践对我国的电力市场改革有以下启示：①准备充分,先行立法;②统一规划,多方协调;③总体设计,分步实施;④要健全政府监管;⑤建立合理的电价形成机制;⑥电力市场建设要符合市场经济特征;⑦建立电力市场建设的动态调控机制。