An imbalanced development of coal and electricity industries in China

China's coal and electricity industries have a strong reliance on each other, however, because of excessive invasion of government, it is difficult for these two industries to form a stable, reasonable, and transaction cost-saving relationships, but long-run disputes and quarrels. This paper discusses the pricing policies and transaction relationship between these two industries from the historical perspective. It begins with the discussion of coal. Coal market has become competitive since 1980 due to the system of dual track approach, but coal sold to electricity was still tightly controlled by government-guided pricing. Then the paper examines electricity investment and tariff reform. Unlike coal, entry to electricity generation sector was gradually relaxed but generation and retailing tariffs are still strictly regulated. As energy demand and prices soared after 2002, coal and electricity enterprises are all unsatisfied with the rule of price setting of coal sold to electricity industry. This paper concludes that the deliberate low coal price policy does protect electricity industry from fuel cost fluctuation but harm coal industry. Allocative and productive efficiency are difficult to achieve in the long run.     

North African oil and foreign investment in changing market conditions

Since the 1960s, the experiences of the North African oil producers of Libya, Algeria, Egypt and Sudan within the oil industry have followed separate paths, which have led them into different relations with foreign oil companies. While reflecting broader trends of “resource nationalism”, these relations have also been affected by a number of factors specific to these countries. In tracing the evolution of the oil investment frameworks of these countries, as well as their concomitant relations with IOCs, this paper probes the roles played by these factors and argues that the type and size of remaining reserves as well as the capability of NOCs are likely to determine the most future developments in the region's oil industry.     

A dynamic equilibrium of electricity consumption and GDP in Hong Kong: An empirical investigation

Public debates on electricity policy in Hong Kong focus on the regulation regime but seldom discuss the macroeconomic impact. In this paper, we use the novel dataset on electricity consumption and report the following findings: (1) there is a long run equilibrium relationship between real GDP and electricity consumption; (2) a one-way causal effect exists from electricity consumption to real GDP; (3) a significant adjustment process occurs when equilibrium is interrupted; (4) there exists possible structural change in the relationship between electricity consumption and economic activities in 1990s.     

A problem of incentive compatibility in the North Sea petroleum industry

The principal–agent relationship between the governments of the UK and Norway, and the multinational oil companies active in the North Sea petroleum industry is, to some extent, different from a typical principal–agent interaction. For almost three decades, the major criterion for allowing a company to take part in the activity was its previous and planned contribution to the domestic economy by means of applying the highest possible domestic inputs. This study applies mathematical modeling to show that the authorities had the opportunity to offer an incentive scheme to persuade the oil companies to involve domestic suppliers at the governments’ preferred level. Unlike a typical government regulatory framework, which aims to increase efficiency in terms of price and/or quality, the incentive compatible scheme discussed in this paper could, in certain circumstances, generate inefficiency in the daily operation of the oil and gas fields.     

Industrial electricity demand for Turkey: A structural time series analysis

This research investigates the relationship between Turkish industrial electricity consumption, industrial value added and electricity prices in order to forecast future Turkish industrial electricity demand. To achieve this, an industrial electricity demand function for Turkey is estimated by applying the structural time series technique to annual data over the period 1960 to 2008. In addition to identifying the size and significance of the price and industrial value added (output) elasticities, this technique also uncovers the electricity Underlying Energy Demand Trend (UEDT) for the Turkish industrial sector and is, as far as is known, the first attempt to do this. The results suggest that output and real electricity prices and a UEDT all have an important role to play in driving Turkish industrial electricity demand. Consequently, they should all be incorporated when modelling Turkish industrial electricity demand and the estimated UEDT should arguably be considered in future energy policy decisions concerning the Turkish electricity industry. The output and price elasticities are estimated to be 0.15 and − 0.16 respectively, with an increasing (but at a decreasing rate) UEDT and based on the estimated equation, and different forecast assumptions, it is predicted that Turkish industrial electricity demand will be somewhere between 97 and 148 TWh by 2020.     

Capacity choice and water management in hydroelectricity systems

This paper proposes a simple two-period model that captures the seasonal pattern of water inflows and electricity demand observed in many countries where hydropower is a major source of electricity supply. The model characterizes the effects of different inflows pattern on the optimal water management, capacity, and the associated electricity production and price. The first best capacity is a non-monotonic function of water inflows, which provides a rationale for the observed differences in reservoirs sizes across hydropower systems around the world. The monopoly solution is qualitatively similar to the first best outcome, and the privatization of hydroelectric power generation systems does not always imply a social welfare loss.     

Residential consumption of gas and electricity in the U.S.: The role of prices and income

We study the residential demand for electricity and gas, working with nationwide household-level data that cover recent years, namely 1997–2007. Our dataset is a mixed panel/multi-year cross-sections of dwellings/households in the 50 largest metropolitan areas in the United States as of 2008. We estimate static and dynamic models of electricity and gas demand. We find strong household response to energy prices, both in the short and long term. From the static models, we get estimates of the own price elasticity of electricity demand in the − 0.860 to − 0.667 range, while the own price elasticity of gas demand is − 0.693 to − 0.566. These results are robust to a variety of checks. Contrary to earlier literature (Metcalf and Hassett, 1999; Reiss and White, 2005), we find no evidence of significantly different elasticities across households with electric and gas heat. The price elasticity of electricity demand declines with income, but the magnitude of this effect is small. These results are in sharp contrast to much of the literature on residential energy consumption in the United States, and with the figures used in current government agency practice. Our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated.     

Financial optimization in the Turkish electricity market: Markowitz's mean-variance approach

Electricity constitutes the input into many products that produced by industry and used by people. Hence, it can be considered as a product or service that has vital importance in human life and economy. Since it has such special properties of instantaneous production and consumption obligation and unfeasible storage, electricity market is not like other markets. In a competitive electricity market, generation company faces price risks and delivery risks. So that risk management is an important part of a generation company and can deeply effect companies’ profitability. This paper focuses on electricity generation asset allocation between bilateral contracts, such as forward contracts, and daily spot market, considering constraints of generating units and spot price risks. The problem is to find the optimal portfolio based on known electricity generation total costs, bilateral contract prices, it employed Turkish historical balanced market hourly system marginal and day-ahead hourly market prices between of 2006 and 2011. There are limited studies about portfolio optimization in electricity markets in literature and this paper should be considered frontier study taking spot market's hourly prices separately as risky assets. Markowitz mean-variance optimization which is claimed to be the beginning of modern portfolio theory in financial sector is used to demonstrate this approach. Mean-variance optimization has been successfully applied to all cases that modeled for electricity market. Some suggestions for future work are also listed in this paper.     

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.     

A model of market power in electricity industries subject to peak load pricing

This paper studies the exercise of market power in price-regulated electricity industries under peak-load pricing and merit order dispatching, but where investment decisions are taken by independent generating companies. Within this context, we show that producers can exercise market power by under-investing in base-load capacity, compared to the welfare-maximizing configuration. We also show that when there is free entry with an exogenous fixed entry cost that is later sunk, more intense competition results in higher welfare but fewer firms.     

Applying portfolio theory to the electricity sector: Energy versus power

Portfolio theory has found its way in numerous applications for optimizing the electricity generation mix of a particular region. Existing models, however, consider typically a single time period and correspondingly do not properly account for actual dispatch constraints and energy sources with a non-dispatchable, variable output. This paper presents a portfolio theory model that explicitly distinguishes between installed capacity (power), electricity generation (energy) and actual instantaneous power delivery. This way, the variability of wind power and ramp limits of conventional power plants are correctly included in the investment optimization. The model is written as a quadratically constrained programming problem and illustrated in a case study. The results show that the introduction of wind power can be motivated to lower the risk on generation cost, albeit to smaller levels than typically reported in the literature. This wind power deployment further requires the need for sufficiently rampable technologies, to deal with its fluctuating output.     

Technology and the diffusion of renewable energy

We consider investment in wind, solar photovoltaic, geothermal, and electricity from biomass and waste across 26 OECD countries from 1991 to 2004. Using the PATSTAT database, we obtain a comprehensive list of patents for each of these technologies throughout the world, which we use to assess the impact of technological change on investment in renewable energy capacity. We consider four alternative methods for counting patents, using two possible filters: weighting patents by patent family size and including only patent applications filed in multiple countries. For each patent count, we create knowledge stocks representing the global technological frontier. We find that technological advances do lead to greater investment, but the effect is small. Investments in other carbon-free energy sources, such as hydropower and nuclear power, serve as substitutes for renewable energy. Comparing the effectiveness of our four patent counts, we find that both using only patents filed in multiple countries and weighting by family size improve the fit of the model.     

A game theoretic model of the Northwestern European electricity market—market power and the environment

This paper develops a static computational game theoretic model. Illustrative results for the liberalising European electricity market are given to demonstrate the type of economic and environmental results that can be generated with the model. The model is empirically calibrated to eight Northwestern European countries, namely Belgium, Denmark, Finland, France, Germany, The Netherlands, Norway, and Sweden. Different market structures are compared, depending on the ability of firms to exercise market power, ranging from perfect competition without market power to strategic competition where large firms exercise market power. In addition, a market power reduction policy is studied where the near-monopolies in France and Belgium are demerged into smaller firms. To analyse environmental impacts, a fixed greenhouse gas emission reduction target is introduced under different market structures. The results indicate that the effects of liberalisation depend on the resulting market structure, but that a reduction in market power of large producers may be beneficial for both the consumer (i.e. lower prices) and the environment (i.e. lower greenhouse gas permit price and lower acidifying and smog emissions).     

Fuel tax incidence in developing countries: The case of Costa Rica

Although fuel taxes are a practical means of curbing vehicular air pollution, congestion, and accidents in developing countries—all of which are typically major problems—they are often opposed on distributional grounds. Yet few studies have investigated fuel tax incidence in a developing country context. We use household survey data and income–outcome coefficients to analyze fuel tax incidence in Costa Rica. We find that the effect of a 10% fuel price hike through direct spending on gasoline would be progressive, its effect through spending on diesel—both directly and via bus transportation—would be regressive (mainly because poorer households rely heavily on buses), and its effect through spending on goods other than fuel and bus transportation would be relatively small, albeit regressive. Finally, we find that the overall effect of a 10% fuel price hike through all types of direct and indirect spending would be neutral and the magnitude of this combined effect would be modest. We conclude that distributional concerns need not rule out using fuel taxes to address pressing public health and safety problems, particularly if gasoline and diesel taxes can be differentiated.     

Analysis of tax incentives for energy-efficient durables in the EU

Climate change is one of the most significant challenges faced by societies this century. Energy consumption is directly associated with CO₂ emissions and climate change. The European Commission has set out emission reduction targets that require a great deal of energy consumption savings in the next 10 years in European countries. This paper presents the results of an analysis of the potential cost-effectiveness of different policy options aimed to foster the production and consumption of energy-efficient appliances in different European countries. Our results suggest that incentives to promote the use of energy-efficient appliances can be cost-effective, but whether or not they are depends on the particular country and the options under consideration. From the cases considered, tax credits on boilers appear to be a cost-effective option in Denmark and Italy, while subsidies on CFLi bulbs in France and Poland are cost-effective in terms of €/ton of CO₂ abated. Comparing the subsidies against the energy tax options, we find that the subsidies are in most cases less cost-effective than the energy tax.     

Productivity growth and deregulation of Japanese electricity distribution

Deregulation of Japanese electric power industry began in 1995. After the amendment of Electricity Utility Industry Law in 1995, competition was partially introduced in a generation sector and retail competition started from 2000. Eligibility to choose suppliers was gradually extended from larger to smaller customers. As of 2008, almost all customers except households can choose their electricity suppliers. Based upon both previous implementation result of competition policy and review on their achievement, Japanese government will begin new policy debate in 2013 to assess further retail competition which includes household customers. To prepare for policy suggestion on the future electric power industry, this study examines the cost structure of Japanese electricity distribution. For the purpose, we estimate a multi-product translog cost function of Japanese electricity distribution from 1983 to 2003. Using the estimated cost function, we calculate several economic measures such as productivity growth, technical change and economies of scale and scope. The empirical results of this study indicate the improvement in productivity growth after deregulation.     

Corrective regulations on renewable energy certificates trading: Pursuing an equity-efficiency trade-off

As a common policy tool for reducing the cost of achieving the Renewable Portfolio Standard (RPS) targets, Renewable Energy Certificate (REC) trade can also exacerbate distributional inequity in provincial renewable electricity consumption. In this study, two types of corrective regulations –taxation and quotas on REC importing were proposed to pursue the equity-efficient trade-off. The energy, economic, and equity impacts of these corrective regulations were analyzed by applying a multi-region multi-market equilibrium model to China as a case study. The results verified that a free trade REC market can increase distributional inequity, while both import taxation and import quotas can reduce inequity. Compared to the electricity price premium for renewable energy and voluntary green certificate prices, the social cost of implementing these corrective regulations are within the public's willingness-to-pay. Moreover, the cost curve of increasing equity using the two corrective regulations on REC trade were obtained. Import taxation is found to be more cost-efficient, and therefore it should be the prior policy choice for China's central government comparing with import quotas in designing REC trade mechanisms.     

The deregulation of Taiwan electricity supply industry

Taiwan is on the brink of embarking on an ambitious reform in the electricity sector. The future electricity market of Taiwan will be operated under the framework set out in the Electricity Act Amendment. Independent system operator (ISO) will be the core body of the future market operations and its establishment will therefore be the key to the liberalization. This paper presents the proposed implementation plan based on diverse factors considered by the officials. A three steps phased introduction of Taiwan ISO is discussed. During the proposed Phase I interim market arrangements, Taipower's System Operation Department will assume the role of System Operator for the market. The dispatch rules are largely based on the existing Taipower internal procedure. As competition increases, the need for increased transparency will necessitate the establishment of a fully independent ISO in Phase II to provide the real time dispatch services. This will be completed within 2 years after the passage of the Electricity Act Amendment Bill. In the last phase of the deregulation process a multilateral market arrangement for managing energy imbalance and transmission constraints will result in better outcomes in relation to the policy objectives of security and economic efficiency. The 2-year timeframe stipulated in the Electricity Act Amendment Bill is a challenge for the Government and the industry. However, a smoothly functioning Taiwan ISO will bring benefits to the industry and the country in general.     

Distributional effects of a carbon tax on car fuels in France

This paper analyses the distributional effects of alternative scenarios of carbon taxes on car fuels using disaggregated French panel data from 2003 to 2006. It incorporates household price responsiveness that differs across income groups into a consumer surplus measure of tax burden. Carbon taxation is regressive before revenue recycling. However, taking into account the benefits from congestion reduction induced by the tax mitigates regressivity. We show also that recycling additional revenues from the carbon tax either in equal amounts to each household or according to household size makes poorest households better off.