Assessing the impact of regulatory reforms on China's electricity generation industry

In the past two decades, China has experienced a series of regulatory reforms in its electricity industry, aimed at improving power production efficiency. The central planning system was broken up and the market-oriented modern enterprise system was established. Furthermore, the former vertically integrated electricity utilities were divested and the generation sector was separated from the transmission and distribution networks. In this paper, we intend to estimate the impact of regulatory reforms on production efficiency of fossil-fired generation plants using the plant-level national survey data collected in 1995 and 2004. Applying the econometric method of Differences-in-Differences, we estimate the effects of these reforms on the demand for inputs of employees, fuel and nonfuel materials. The results show that the net efficiency improvement in labor input associated with the regulatory reforms is roughly 29% and the gains in nonfuel materials are about 35%, while there is no evidence of efficiency gains in fuel input associated with the electricity reforms.     

Regulatory reforms and productivity: An empirical analysis of the Japanese electricity industry

The Japanese electricity industry has experienced regulatory reforms since the mid-1990s. This article measures productivity in Japan's steam power-generation sector and examines the effect of reforms on the productivity of this industry over the period 1978–2003. We estimate the Luenberger productivity indicator, which is a generalization of the commonly used Malmquist productivity index, using a data envelopment analysis approach. Factors associated with productivity change are investigated through dynamic generalized method of moments (GMM) estimation of panel data. Our empirical analysis shows that the regulatory reforms have contributed to productivity growth in the steam power-generation sector in Japan.     

Electricity regulation and electricity market reforms in China

The electricity industry of China has been in a process of reforms since the 1980s. This paper gives a review on the three main stages of reforms in China so as to trace out key features of various reform measures including those for power investment financing, the separation between government and power enterprises, and the division between power generation firms and power grids. The findings suggest that further regulatory change in China's electricity market reform is necessary when integration of the electricity markets and increased competition are paving the way ahead for a market-oriented structure. Prospective electricity regulation in the form of a strong legal system and effective institutions that protect market competition and promote appropriate incentives for efficiency are suggested in the paper.     

Trends in prices to commercial energy consumers in the competitive Texas electricity market

To date, the price of electricity to commercial or business energy consumers has generally increased at greater rates in the areas of Texas where retail competition has been introduced than in areas that do not enjoy competition. Trends in commercial competitive prices have largely mirrored trends in residential prices. Market restructuring has tended to increase the sensitivity of retail electricity prices to changes in the price of natural gas, the marginal fuel used for generation in Texas. Consequently, the rapid increases in the commodity price of natural gas following restructuring led to increases in competitive electric rates which exceeded the increases in areas not exposed to restructuring, where the fuel component of electric rates tend to reflect a weighted average of the utilities’ fuel costs. There is some evidence that pricing behavior by competitive retailers changed when the retailers affiliated with the incumbent utilities were permitted some pricing flexibility, resulting in a reduction in prices.     

Characteristics of the prices of operating reserves and regulation services in competitive electricity markets

In this paper, characteristics of the prices of reserves and regulation services in the Ontario, New York and ERCOT electricity markets are studied. More specifically, price variability, price jumps, long-range correlation, and non-linearity of the prices are analyzed using the available measures in the literature. For the Ontario electricity market, the prices of 10-min spinning, 10-min non-spinning, and 30-min operating reserves for the period May 1, 2002 to December 31, 2007 are analyzed. For the New York market, prices of the same reserves plus regulation service are studied for the period February 5, 2005 to December 31, 2008. For the ERCOT market, we analyze the prices of responsive reserve, regulation up and regulation down services, for the period January 1, 2005 to December 31, 2009. The studied characteristics of operating reserve and regulation prices are also compared with those of energy prices. The findings of this paper show that the studied reserve and regulation prices feature extreme volatility, more frequent jumps and spikes, different peak price occurrence time, and lower predictability, compared to the energy prices.     

Has electric utility restructuring led to lower electricity prices for residential consumers in Texas?

This paper analyzes the determination of residential electricity prices in the competitive Electric Reliability Council of Texas (ERCOT) market. This analysis suggests that electricity restructuring in Texas has not yet resulted in lower prices for the majority of residential energy consumers in areas open to competition. Contrary to common expectations, residential electricity costs for consumers at a typical (1000 kWh per month) consumption level have increased at a greater rate in the areas of Texas offering retail choice than in the areas of the State where retail competition has not been introduced.     

Recent adjustments in the electricity markets of developing countries

Over the last two decades, in most countries of the world, a period of falling electricity prices has given way to a period of rising real prices. One would except to detect adjustments to this change in the market for electricity. This paper seeks to compare the process of adjustment in different regions of the developing world by applying a very simple model consistently to the several regions. Significant adjustments are detected in some developing regions and anomalous behaviour in others.     

Adaptability of competitive electricity reforms a modular analysis

Among the competitive electricity reforms that have been implemented in Europe and the US for the last 18 years, none has “survived” over several years without major changes. Their changing nature raises the question of their adaptability. Two characteristics of reforms play a key role on their adaptation properties. Firstly, they are “modular” objects in the sense of [Baldwin, C., 2008. Where do transactions come from? Modularity, transactions, and the boundaries of firms. Industrial and Corporate Change 17 (1), 155–195]. Secondly, they are produced in an institutional process which leads to “incomplete” rules and designs [Pistor, K., Xu, C., 2003. Incomplete law. International Law and Politics 35, 931–1013]. We propose a typology of adaptations based on the framework proposed by [Williamson, O.E., 1991. Comparative economic organization: the analysis of discrete structural alternatives. Administrative Science Quarterly 36 (2), 269–296] for contracts: (1) in case of small disturbances, adaptations are realized quasi-automatically, by autonomous decisions of the institutions governing the implementation of reforms; (2) in case of middle-range disturbances, adaption is made by Coasian bargaining; (3) finally, in case of strong disturbances, or when bargaining is not feasible, the adaptation of reforms is in the hands of legislative and executive institutions [North, D.C., 2005. Le processus du développement économique. Editions d’Organisation]. These institutions can reform the reforms [Joskow, P.L., 2006. Introduction to electricity sector liberalization: lessons learned from cross-country studies. In: Sioshansi, F.P. (Ed.), Electricity Market Reform: An International Perspective. Elsevier, Amsterdam, pp. 1–32; Hogan, W.W., 2002. Electricity market restructuring: reforms of reforms. Journal of Regulatory Economics 21, 103–132]. The role of these types of adaptations in each electricity reform is a consequence of the allocation of rights to the regulator, to stakeholders and to legislative and executive institutions.     

Carbon prices,institutions, technology and electricity generation firms in two Australian states

A relationship exists for the liberalised Australian electricity supply industry between institutional structures and technological change. The traditional institutional framework has been based on centralised generation and a regulated vertically integrated monopoly structure. This paper investigates the issues of institutional and technological change using the social cost perspective (including externalities), and focuses on the imperatives of greenhouse gas emission reductions.     

The impact of Australian ETS news on wholesale spot electricity prices: An exploratory analysis

This article investigates the impact of news concerning the development of emissions trading in Australia (such as the Carbon Pollution Reduction Scheme (CPRS)) on wholesale electricity spot prices, by using a database of 117 news announcements from December 1, 1998 to July 1, 2009. As power producers constitute the bulk of the participants of the proposed Australian emissions trading scheme, regulatory changes (about allocation, banking, coverage, targets) are indeed likely to affect the five interconnected electricity markets in New South Wales, Queensland, South Australia, Victoria, and Tasmania. We assess these effects with an ARMA(1,1)-GARCH(1,1) model, where daily electricity spot prices are regressed against exogenous variables in the mean and variance equations. This article constitutes the first empirical analysis of Australian ETS news effects on electricity wholesale spot prices. Our results show two asymmetric types of news effects, depending on their information content.     

Short term forecasting of electricity prices for MISO hubs: Evidence from ARIMA-EGARCH models

This study estimates three time series models (ARIMA, ARIMA-EGARCH, and ARIMA-EGARCH-M) for hourly real time electricity prices for each of the five hubs of the Midwest Independent System Operator (MISO) and examines the in- and out-of-sample forecasting performance of the respective models. The results from the ARIMA models reveal the presence of autoregressive conditional heteroskedasticity. Recognizing the possibility of asymmetric time-varying volatility, the EGARCH specification for the variance equation demonstrates the presence of an inverse leverage effect in electricity prices for each hub. With respect to forecasts, no one model clearly dominates the others in terms of in-sample forecasting performance based on four forecast evaluation statistics. However, the ARIMA-EGARCH-M model outperforms the other models (Michigan hub is the exception) in terms of the out-of-sample forecasting performance.     

The crucial relationship among energy commodity prices: Evidence from the Spanish electricity market

The main purpose of this article is twofold to analyze: (a) the long-term relation among the commodities prices and between spot electricity market price and commodity prices, and (b) the short-term dynamics among commodity prices and between electricity prices and commodity prices. Data between 2002 and 2005 from the Spanish electricity market was used. Econometric methods were used in the analysis of the commodity spot price, namely the vector autoregression model, the vector error correction model and the granger causality test. The co-integration approach was used to analyze the long-term relationship between the common stochastic trends of four fossil fuel prices. One of the findings in the long-term relation is that the prices of fuel and the prices of Brent are intertwined, though the prices of Brent ten to “move” to reestablish the price equilibrium. Another finding is that the price of electricity is explained by the evolution of the natural gas series.     

Regulatory effects on electricity prices in Hong Kong

In Hong Kong, electricity is supplied by two investor-owned utilities: China Light and Power Company Limited (CLP) and the Hongkong Electric Company Limited (HEC). These two utilities operate under a special regulatory arrangement known as the Scheme of Control, which was proposed by the industry in 1964. The objective of this paper is to evaluate whether the Scheme of Control has fulfilled its original intention of protecting both the producer’s right to serve and the consumer’s right to be served. Our empirical results have indicated that the first Scheme of Control (1964–1978) had a greater effect on reducing electricity prices than the second one (1979–1992).     

A critical assessment of the different approaches aimed to secure electricity generation supply

Since the very beginning of the power systems reform process, one of the key questions posed has been whether the market, of its own accord, is able to provide satisfactory security of supply at the power generation level or if some additional regulatory mechanism needs to be introduced, and in the latter case, which is the most suitable approach to tackle the problem. This matter is undoubtedly gaining importance and it has taken a key role in the energy regulators’ agendas.     

A critical assessment of the Hong Kong Government's proposed post-2008 regulatory regime for local electricity utilities

In December 2005, the Hong Kong Government issued a “Consultation Paper on Future Development of the Electricity Markets in Hong Kong: Stage II Consultation,” proposing a post-2008 regulatory regime upon the expiration of the existing regulatory contract between the Hong Kong Government and each of the two local electricity utilities. We assess the proposal using the criteria of safe, reliable, and environmentally friendly service at the lowest rates that will allow the utilities reasonable returns on their investments. We caution that if fully adopted, the highly risky proposal may lead to less-reliable service without the compensating benefits to the environment.     

Impacts of a rise in electricity tariff on prices of other products in Vietnam

This study examines the impacts of increasing electricity tariff to the long run marginal cost on prices of other products using a static input–output approach. It is found that such an increase would drive up the prices of all other products. Although the aggregate price impact from such an increase is not large, it would be socially difficult to implement this increase at one time, particularly given that Vietnam is facing high inflation rate. A roadmap for electricity tariff increase is thus discussed.     

The renewable energy targets of the Maghreb countries: Impact on electricity supply and conventional power markets

Morocco, Algeria and Tunisia, the three countries of the North African Maghreb region, are showing increased efforts to integrate renewable electricity into their power markets. Like many other countries, they have pronounced renewable energy targets, defining future shares of “green” electricity in their national generation mixes. The individual national targets are relatively varied, reflecting the different availability of renewable resources in each country, but also the different political ambitions for renewable electricity in the Maghreb states. Open questions remain regarding the targets’ economic impact on the power markets. Our article addresses this issue by applying a linear electricity market optimization model to the North African countries. Assuming a competitive, regional electricity market in the Maghreb, the model minimizes dispatch and investment costs and simulates the impact of the renewable energy targets on the conventional generation system until 2025. Special emphasis is put on investment decisions and overall system costs.     

Statistical analysis of negative prices in European balancing markets

The presence of renewable power generation technologies increases the need for system flexibility due to their variable nature. The increasing share of variable renewables in European power systems create a downward adequacy problem, which deals with the ability of power systems to cope with periods of excess generation. The occurrence of negative prices on Central Western European electricity markets confirms the relevance of this issue, which is referred to as “incompressibility of power systems” and is assessed as a barrier for further renewable power integration. The objective of this article is to identify the main drivers of negative price periods in European balancing markets, by means of both an empirical and regression analysis. Results confirm a positive relation with the scheduled generation of renewables and inflexible base load, as well as a negative relation with the scheduled system load. Furthermore, the occurrence of negative prices is related to the positive and negative forecast error of renewable generation and demand, respectively. It is concluded that negative balancing market prices provide a market signal for investments in flexibility sources such as flexible generation, demand response, electricity storage, and interconnector capacity.