on the benefits of behind the meter rooftop solar and energy storage the importance of retail rate design abstract we investigate the impact of retail rate design on the investment incentives avoided utility costs and cost shifting concerns associated with rooftop solar plus battery storage systems that are located behind the meter to illustrate these interactions we consider recently proposed changes to california s time of use pricing policy for commercial and industrial consumers which shifts on peak prices from midday to the constrained evening hours we find that these rate adjustments reduce cost shifting concerns across consumers considerably but also decreases solar pv investment and has an ambiguous effect on storage investment we demonstrate that storage reduces utility costs but the magnitude of this effect varies critically with the prevailing retail rate structure importantly we show that a shift in the on peak period to the constrained evening hours does not always elevate the avoided cost associated with a battery system when demand charges are imposed on a consumer s private maximum demand we illustrate that this issue can be alleviated by imposing demand charges on consumption that arises in system constrained hours we find that while storage reduces the utility s costs it can also increase cost shifting concerns these findings demonstrate the potential trade offs between maximizing avoided costs and minimizing cost shifting concerns under commonly employed retail rate structures

why market rules matter optimizing pumped hydroelectric storage when compensation rules differ abstract policies markets and technologies interact to create the modern electrical system integrating large amounts of electricity generated by variable renewable resources such as from wind and sunlight into electricity systems may require energy storage technologies to synchronize electricity production with electricity demand electricity markets compensate the performance of these energy storage technologies for the services they provide and these markets are often operated by regional independent system operators isos that specify the market rules for this compensation to examine how different iso rules can affect the operation and profitability an energy storage technology we develop a dynamic programming model of pumped hydroelectric storage phes facility operation under the market rules from the midcontinent iso and iso new england we present how differences in rules between these isos produced different operational strategies and profits and how important they are for phes profitability

optimal operation of pumped hydro storage plants with continuous time varying power prices abstract pumped hydro storage plants are increasingly considered as a complement to intermittent renewable energy sources hence a profound understanding of their underlying economics gains in importance to this end we derive efficient operation programs for storage plants which operate in an environment with time varying but deterministic power prices optimal control theory thereby provides a consistent framework for analysis in continuous time taking into account the different specifics of pumped hydro setups with large not restricting and small restricting reservoirs an empirical illustration discusses storage operation in the german market showing that the profit potential for storage plants decreased significantly between 2008 and 2011 affecting both large and small reservoir plants

money and credit in liquidity provision abstract this paper studies the liquidity provision in a model where the roles of money are challenged by other financial instruments alternative to money credit can be used as means of payment and rate dominating assets are available to serve as stores of value two features are found to be crucial in rendering money valuable in this environment information asymmetry in credit trading relationship and uncertainty in individuals liquidity demand in general the model economy can display a payment mechanism of money only credit only or mixed use of money and credit in transactions depending on the severity of the information asymmetry the optimal quantity of money in our paper is shown to contrast those in other monetary models

economic feasibility of stationary electrochemical storages for electric bill management applications the italian scenario battery energy storage systems besss are expected to become a fundamental element of the electricity infrastructure thanks to their ability to decouple generation and demand over time besss can also be used to store electricity during low price hours when the demand is low and to meet the demand during peak hours thus leading to savings for the consumer this work focuses on the economic viability of bess from the point of view of the electricity customer the analysis refers to a lithium ion li ion an advanced lead acid a zinc based a sodium sulphur nas and a flow battery the total investment and replacement costs are estimated in order to calculate the cumulated cash flow the net present value npv and the internal rate of return irr of the investment a parametric analysis is further carried out under two different assumptions a varying the difference between high and low electricity prices b varying the peak demand charges the analysis reveals that some electrochemical technologies are more suitable than others for electric bill management applications and that a profit for the customer can be reached only with a significant difference between high and low electricity prices or when high peak demand charges are applied

electricity trading and negative prices storage vs disposal electricity cannot yet be stored on a large scale but technological advances leading to cheaper and more efficient industrial batteries make grid level storage of electricity surpluses a natural choice because electricity prices can be negative it is unclear how the presence of negative prices might affect the storage policy structure known to be optimal when prices are only nonnegative or even how important it is to consider negative prices when managing an industrial battery for fast storage a storage facility that can both be fully emptied and filled up in one decision period we show analytically that negative prices can substantially alter the optimal storage policy structure e g all else being equal it can be optimal to empty an almost empty storage facility and fill up an almost full one for more typical slow grid level electricity storage we numerically establish that ignoring negative prices could result in a considerable loss of value when negative prices occur more than 5 of the t

financial market innovation and security design an introduction abstract the article describes in the context of theory and practice this special issue of the journal of economic theory on financial market innovation and security design the main focus is on security design in incomplete financial markets possibly with asymmetrically informed traders we first survey the general equilibrium literature which emphasizes the spanning role of securities we then provide a unified framework encompassing the literature that employs a cara guassian setting to study the impact of financial innovation on risk sharing and information aggregation journal of economic literature classification numbers g10 d52

financial storage rights should energy storage buy and sell power at wholesale prices like utilities and generators or should its physical and financial operation be asynchronyous as with transmission lines in the first case storage straightforwardly profits through intertemporal arbitrage also known as load shifting and peak shaving in this paper the latter case referred to as passive storage is examined because passive storage does not make nodal price transactions new mechanisms are necessary for its integration into electricity markets this issue is addressed by further developing the analogy between energy storage and transmission specifically financial rights are defined for storage and tracing is extended to multiperiod power flows linked by storage like flowgate transmission rights the new financial storage rights redistribute the system operator s merchandising surplus and enable risk averse market participants to hedge against nodal price volatility resulting from storage congestion simple examples are given demonstrating the implementation of the new mechanisms game theoretic analysis suggests that financial storage rights mitigate gaming when both the generator and load bid strategically

optimal innovation of futures contracts this article presents a simple model of the innovation of new futures contracts by transaction volume maximizing futures exchanges in incomplete markets under uncertainty with mean variance preferences and proportional transactions costs we characterize the set of nash equilibria for a number of exchanges simultaneously or sequentially choosing contracts the optimal monopolistic contract design is shown to be pareto optimal an example shows the failure of pareto optimality for aparticularnash equilibrium likewise in a monopolistic multiperiod setting an example shows the failure of pareto optimality given an incentive for the exchange to induce turnover

optimal hedging and equilibrium in a dynamic futures market abstract this paper considers an agent maximizing the expected utility of the sum of the terminal value of a fixed portfolio of spot market assets and the terminal value of a margin account on a futures trading position closed form solutions for the optimal hedging strategy are provided in several special cases

credit mismatch and breakdown abstract this paper studies the phenomenon of mismatch in a decentralized credit market where borrowers and lenders must engage in costly search to establish credit relationships our dynamic general equilibrium framework integrates incentive based informational frictions with a matching process highlighted by i borrowers endogenous market entry and exit decision entry frictions and ii time and resource costs necessary to locate credit opportunities search frictions a key feature of the incentive compatible loan contract negotiated between borrowers and lenders is the interaction of informational frictions in the form of moral hazard with entry and search frictions we find that the removal of entry barriers can eliminate incentive based equilibrium credit rationing more generally entry and incentive frictions are important in understanding the extent of credit rationing and credit mismatch while search and incentive frictions are important for understanding credit market breakdown

electricity price arbitrage with plug in hybrid electric vehicle gain or loss abstract customers utilities and society can gain many benefits from distributed energy resources ders including plug in hybrid electric vehicles phevs using battery on phev to arbitrage electricity price is one of the potential benefits to phev owners there is however disagreement on the magnitude of such profit this study uses a stochastic optimization model to estimate the potential profit from electricity price arbitrage of two types of phevs phev 10 and phev 40 under three scenarios with variant electricity tariff and phev owners over a five year period the simulation results indicate that under current market structure even with significant improvement in battery technologies e g higher efficiency lower cost the phev owners can t achieve a positive arbitrage profit this finding implies that expected arbitrage profit solely is not a viable option to engage phevs larger adoption subsidy and combining phev arbitraging with alternative phev services are required

optimality of incomplete markets abstract in a static exchange economy where the traders initial endowments are risky the optimality of the financial structure is studied when markets are incomplete only financial structures with the same number of assets are compared a market structure is optimal when in a particular economy it yields an allocation of risks which cannot be pareto dominated through the implementation of any other market structure in a linear gaussian setup the optimal market structures are shown to span an eigenspace of a matrix which combines the risk exposures of the participants in the market approximately weighted by a measure of their risk aversions journal of economic literature classification numbers d60 g10

commission revenue maximization in a general equilibrium model of asset creation abstract a general equilibrium model of endogenous asset formation is given in which a monopolistic agent called the designer can create any types of assets and charage commissions as long as the total number of the types of assets does not exceed some given constant when the designer can create at most two assets a commission revenue maximizers always exists otherwise it may not moreover the so called maximizers may be badly behaved a profit maximiser may not exist even when the number of types of assets is endogenously determined from a positive fixed costs of creating an asset journal of economic literature classification numbers d52 d80

technical and economical assessment of distributed electrochemical storages for load shifting applications an italian case study abstract time of use tou energy cost management involves the use of energy storage systems esss by customers to reduce their electricity bills the ess is charged during off peak time periods when electricity energy prices are low and discharged during times when on peak energy prices are applied this article addresses the question whether it is economically viable to install medium scale distributed esss designed to lower the electricity cost for a customer side application assuming flexible electricity tariffs the technical economical evaluation is carried out referring to lithium ion li ion sodium sulfur nas and vanadium redox battery vrb technologies performing a parametric analysis by changing the capital cost of the batteries and the difference between the maximum and minimum electricity price a case study is performed to show the advantages disadvantages of the proposed approach the analysis reveals that at the current costs of esss the use of batteries for tou applications is economically advantageous for a public institution facility in italy only if there is a significant difference between the maximum and the minimum electricity price the decrease in the cost of storage stimulated by the implementation of support policies will make ess even more convenient for load shifting applications

coexistence of money and interest bearing securities abstract a random matching model with money is used to study the nominal yield on small denomination bearer safe discount securities issued by the government there is always one steady state with matured securities circulating at par and for some parameters another with them circulating at a discount in the former a necessary and sufficient condition for a positive nominal yield on not yet matured securities is exogenous discriminatory treatment of them by the government in the latter the post maturity discount on securities induces a deeper pre maturity discount even without such discriminatory treatment

endogenous market thinness and stock price volatility thin equity markets cannot accommodate temporary bulges of buy or sell orders without large price movements the resulting volatility can induce risk averse transactors who face transaction costs to desert these markets thus thinness and the related price volatility may become joint self perpetuating features of an equity market irrespective of the volatility of asset fundamentals if however appropriate incentive schemes are adopted to encourage entry by additional investors this vicious circle can be broken eventually shifting the market to a selfsustaining superior equilibrium characterized by a higher number of transactors lower price volatility and larger supply of the asset a number of empirical studies cohen et al 1976 telser and higimbotham 1977 pagano 1986 tauchen and pitts 1983 have found that thin speculative markets are ceteris paribus more volatile than deep ones a plausible explanation for this finding is that thin markets are generally characterized by small numbers of transactors per unit time and thus their prices are more sensitive to the impact of individual traders demand shocks conversely in deep markets transactors are so many that the uncorrelated demand shocks experienced by individual traders tend to offset each other and leave market prices largely unaffected while this suggests a rationale for the observed relationship between market size and price volatility it does so by taking market size as the exogenous factor however the volatility of a speculative market may feed back on its size in the sense that the high liquidation risk implied by very volatile prices can induce potential entrants to keep out of the market this paper shows that in a stock market with transaction costs this interaction between thinness and volatility can produce multiple steady state equilibria some characterized by low trade and high volatility and others by high trade and low volatility whether the market will settle in one equilibrium or another depends entirely on the expectations held by economic agents sections 2 and 3 the existence of these multiple bootstrap equilibria can be explained heuristically as follows each additional trader generates a positive externality for other actual or potential traders by decreasing the riskiness of the stock lower risk in turn tends to attract more investors with the effect of raising stock prices and inducing corporations to issue additional equity we thus have a feedback loop between market size and price volatility where market size is measured both along the dimension of the number of traders and along that of the total stock of equities if however investors face transactions costs in the stock market this positive feedback may fail to be operative if the volume of trade is expected to be small investors with relatively high transaction costs will abstain from trading thus the market

from search to match when loan contracts are too long a model of lending is presented where loans are established in matches between banks lenders and entrepreneurs borrowers who meet in a search process projects turn out randomly a quick payoff or a long term payoff that requires a rollover of the loan the model generates under proper parameter conditions two steady states without or with rollover and rollover is socially inefficient under imperfect information the standard debt contract is privately efficient however it extends the domains of equilibria with socially inefficient rollover the global dynamics displays a continuum of equilibrium paths that each exhibits sudden discontinuities crises in which the mass of outstanding loans is reduced by a quantum amount of terminations crises have a cleansing effect

the impact of electricity storage on wholesale electricity prices this paper analyzes the impact of electricity storage on the production cost of a power system and the marginal cost of electricity electricity price using a unit commitment model also real world data has been analyzed to verify the effect of storage operation on the electricity price using econometric techniques the unit commitment model found that the deployment of a storage system reduces the fuel cost of the power system but increases the average electricity price through its effect on the power system operation however the reduction in the production cost was found to be less than the increase in the consumer s cost of electricity resulting in a net increase in costs due to storage different storage and co2 price scenarios were investigated to study the sensitivity of these results the regression analysis supports the unit commitment results and finds that the presence of storage increases average wholesale electricity prices for the case study system

pairwise credit in search equilibrium pairwise extension of credit is introduced into the barter search economy previously analyzed by the author the penalty for failure to repay a debt is modeled as the end of trading opportunities since credit availability makes access to trade more valuable there may be multiple equilibrium credit limits since the credit limit affects the implicit interest rate and the stock of inventories it is necessary to check the net impact of the credit limit on the incentive to repay in a calculated example with lumpy credit availability multiple equilibria are very common with a greater credit limit associated with a lower implicit interest rate with smooth credit availability no multiple equilibria were found surprisingly credit can break the no production equilibrium

estimating the value of electricity storage in pjm arbitrage and some welfare effects significant increases in prices and price volatility of natural gas and electricity have raised interest in the potential economic opportunities for electricity storage in this paper we analyze the arbitrage value of a price taking storage device in pjm during the six year period from 2002 to 2007 to understand the impact of fuel prices transmission constraints efficiency storage capacity and fuel mix the impact of load shifting for larger amounts of storage where reductions in arbitrage are offset by shifts in consumer and producer surplus as well as increases in social welfare from a variety of sources is also considered

anonymity and optimality of competitive equilibria when markets are incomplete abstract we study the optimality or efficiency of competitive equilibria in a standard two period economy where markets are incomplete statistical information about consumers preferences and endowments is known to a social planner but the planner cannot observe consumers types directly a competitive equilibrium is anonymous constrained optimal if the social planner cannot pareto improve upon the equilibrium allocation by intervening in asset markets with any asset trade rule satisfying anonymity in some cases a competitive equilibrium is robustly anonymous constrained optimal whereas it is known that competitive equilibria are generically constrained suboptimal for the case of completely observable types journal of economic literature classification numbers d52 d82 h21

the suspension of borrowing an implicit penalty for loan default under imperfect information abstracta credit seeker may be suspended from borrowing for a period of time due to a previous default such suspension is widely used in bank lending through credit check our work analyses the effects of suspension on the investment choice of borrowers under uncertainty and on the lending policy of banks facing asymmetric information we show that suspension should be tightened at low loan rates but loosened otherwise to improve the repayment performance of borrowers we also show that although credit rationing may not be completely removed due to imperfect information the excess demand for credit or transitive waiting in the market can actually be attenuated by such efficient use of suspension our theoretical predictions are consistent with observed cyclical patterns of changes in lendingrates and suspension severity

arbitraging intraday wholesale energy market prices with aggregations of thermostatic loads we investigate the potential for aggregations of residential thermostatically controlled loads tcls such as air conditioners to arbitrage intraday wholesale electricity market prices via non disruptive load control we present two arbitrage approaches 1 a benchmark that gives us an optimal policy but requires local computation or real time communication and 2 an alternative based on a thermal energy storage model which relies on less computation communication infrastructure but is suboptimal we find that the alternative approach achieves around 60 80 of the optimal wholesale energy cost savings we use this approach to compute practical upper bounds for savings via arbitrage with air conditioners in california s intraday energy market we investigate six sites over four years and find that the savings range from 2 37 per tcl per year and depend upon outdoor temperature statistics and price volatility

endogenous determination of the degree of market incompleteness in futures innovation abstract this paper studies the determination of the number of futures contracts created by an exchange we show that though the exchange can create the futures contracts costlessly if the investors have differential information there may be an upper bound on the number of contracts that the exchange is willing to create in a stylized economy we investigate what type of contracts and how many of these the exchange is willing to create journal of economic literature classification numbers d52 d82 g14

online adaptive real time optimal dispatch of privately owned energy storage systems using public domain electricity market prices this paper aims to evaluate and improve the usefulness of publicly available electricity market prices for real time optimal dispatching rtod of a privately owned energy storage system ess in a competitive electricity market the rtod algorithm seeks to maximize the revenue by exploiting arbitrage opportunities available due to the inter temporal variation of electricity prices in the day ahead market the pre dispatch prices issued by the ontario independent electricity system operator and the corresponding ex post hourly ontario energy prices are employed as the forecast and the actual prices a compressed air ess is sized and employed for evaluations due to its lower capital expenditure and its ability to be positively influenced by the availability of waste heat first the conventional rtod algorithm is developed by formulating a mixed integer linear programming problem it is demonstrated that the forecast inaccuracy of publicly available market prices significantly reduces the ess revenue then a new adaptive algorithm is proposed and evaluated which adapts the objective function of the optimization problem online based on historical market prices available before real time the outcomes reveal that the proposed adaptive rtod can significantly increase the ess revenue compared to the conventional algorithm as well as the back casting method proposed in prior studies

the macroeconomics of labor and credit market imperfections labour market frictions are not the only possible source of high unemployment credit market imperfections driven by microeconomic frictions and influenced by macroeconomic factors could also be to blame to develop this idea in a simple and tractable macroeconomic model we treat credit and labour market imperfections in a symmetrical way accordingly we introduce specificity in credit relationships and assume that credit to potential entrepreneurs is rationed due to endogenous search frictions in the spirit of diamond 1990 these imperfections mirror job search frictions in the labour market we study the determination of equilibrium unemployment in the presence of credit market frictions both with exogenous and endogenous wages we explore a number of possible extensions endogenous destruction monetary policy and the short run effects of financial liberalization

heterogeneous borrowers liquidity and the search for credit abstract we develop a general equilibrium model of credit formation where borrowers and lenders must search for matches and where the composition of borrowers adjusts to satisfy equilibrium entry conditions when market liquidity dries up as a result of fundamental shocks to the system fewer borrowers will participate in the credit market with low quality borrowers suffering disproportionately because of a flight to quality however less liquid credit markets need not be associated with lower social output because the effect of higher average quality may outweigh that of reduced market participation depending crucially on the source of the liquidity shock

a model of pairwise credit a model of credit as a pairwise activity is studied in a random matching model where there are no social sanction mechanisms the model depicts some prevalent features of credit arrangements even though there are no informational asymmetries and the price of credit is determined competitively there is credit rationing the credit relationships are also longlasting the introduction of credit into a barter economy does not necessarily increase the welfare of debtors

the private and social economics of bulk electricity storage the ability to store excess intermittent renewable electricity is increasingly being seen as a key option for integrating large quantities of renewable capacity however intermittent energy sources currently account for very small amounts of total generation despite this fact policymakers have begun implementing requirements that will dramatically increase the amount of bulk storage capacity this paper examines the social benefits provided by bulk storage in the texas electricity market which has a large amount of renewable capacity relative to other states but still quite limited renewable penetration we focus on the impact of arbitraging electricity across time a major service of bulk storage using current storage technologies we demonstrate that electricity arbitrage will increase daily co2 emissions by an average of 0 19 tons for each mwh stored in addition daily so2 emissions will increase by an average of 1 89 pounds mwh while nox emissions will fall by an average of 0 15 pounds mwh

is inexpensive natural gas hindering the grid energy storage industry abstract grid energy storage is a maturing technology and forecasts of the industry s growth have been promising however recent years have realized little growth in actual deployments of grid level storage and several high profile storage companies and projects have failed we hypothesize that falling natural gas prices have significantly reduced the potential profit from many u s energy storage projects since 2009 and quantify that effect we use engineering economic models to calculate the monthly revenue to energy storage devices providing frequency regulation and energy arbitrage in several electricity markets and compare that revenue to prevailing natural gas prices we find that flywheel devices providing frequency regulation were profitable in months when natural gas prices were above 7 mcf but face difficulties at current prices around 4 mcf for energy arbitrage alone we find that the breakeven capital cost for large scale storage was around 300 kwh in several key locations in 2004 2008 but is around 100 kwh in the same locations today though cost and performance improvements have been continually decreasing the effective cost of energy services from storage fundamental market signals indicating the need for energy storage are at or near 10 year lows for both energy arbitrage and frequency regulation

optimal planning to include storage devices in power systems it is difficult to forecast renewable energy resources due to their variability high uncertainty of the resources increases the concern about the reliable operation of the electric power system storage devices have been considered a candidate to control variable energy resources and most studies on storage devices are performed in the economic dispatch therefore electric power adequacy may be an issue in this paper a new approach in the optimal power flow framework is proposed for deploying storage devices and the feasibility and economic impact analyses are discussed

dynamic asset pricing with non redundant forwards abstract in an incomplete market in which non redundant forward contracts contribute to span the uncertainty some standard results of portfolio theory must be amended when the investment opportunity set is driven by k state variables a k 3 mutual fund separation theorem is obtained in lieu of merton s k 2 fund separation result the additional fund is a portfolio that hedges the interest rate risk brought about by the optimal portfolio strategy itself second the mean variance efficiency of the market portfolio of cash assets is neither a necessary nor a sufficient condition for the linear relationship between expected return and beta to hold third the pricing equation for a forward contract is shown to contain an extra term relative to that for a cash asset term we name strategy risk premium

the role of smart metering and decentralized electricity storage for smart grids the importance of positive externalities because of its fluctuating nature the feed in of renewable energy sources into low voltage distribution grids complicates the balancing of demand and supply this carries the risk of grid instabilities causing damage to electronic devices and power outages which eventually lead to deadweight losses in principle the problems arising from fluctuating feed in can be solved by increasing demand elasticity or decoupling generation and consumption for the first an advanced metering infrastructure and for the second decentralized electricity storage are considered core enablers however to date the diffusion of these future smart grids core components is low the present study provides new insights for understanding and overcoming diffusion barriers for this purpose a qualitative research approach was chosen the most important stakeholders as well as related private costs and benefits are identified the findings show that both of these smart grid components are widely considered beneficial to society by experts however because the numerous private benefits are widely distributed among distinct players socially desired investments are hampered by positive externalities the importance of well designed and consistent regulatory and legal frameworks that provide economic incentives to involved stakeholders is highlighted in the results

cloud energy storage for grid scale applications in the uk abstract in this paper the uk s electricity market and battery technologies were researched to determine the economics of aggregating domestic batteries for grid scale services a feasibility study was conducted under three scenarios in order to estimate the value of advanced lead acid ala and lithium ion li batteries for domestic households in the uk a profit optimization model was built using historical market data and technical parameters of the batteries an aggregated system of 5000 batteries was simulated and used to compare and stack value streams of seven different grid scale services in the uk including energy arbitrage reserve and frequency regulation services the results showed that using a battery system for domestic services is currently not economically viable however grid scale provision of dynamic frequency response and fast reserve services yield sufficient annual revenue to compensate for these losses the annual profit margin per household obtained was 532 692 for ala and li batteries respectively allowing a shared margin of 230 300 after accounting for household costs the promotion of an aggregated storage system is hindered by current regulatory barriers in the uk such as a double payment structure for storage operators lack of subsidy and lack of separate definition for storage devices

energy storage arbitrage under day ahead and real time price uncertainty electricity markets must match real time supply and demand of electricity with increasing penetration of renewable resources it is important that this balancing is done effectively considering the high uncertainty of wind and solar energy storing electrical energy can make the grid more reliable and efficient and energy storage is proposed as a complement to highly variable renewable energy sources however for investments in energy storage to increase participating in the market must become economically viable for owners this paper proposes a stochastic formulation of a storage owner s arbitrage profit maximization problem under uncertainty in day ahead and real time market prices the proposed model helps storage owners in market bidding and operational decisions and in estimation of the economic viability of energy storage case study results on realistic market price data show that the novel stochastic bidding approach does significantly better than the deterministic benchmark

rational expectations business cycles in search equilibrium we examine the rational expectations equilibrium paths of the model of search and barter in diamond s aggregate demand management in search equilibrium for some initial positions there are two equilibrium paths converging to different steady states with the high activity path pareto dominating the low activity path with some parameters there is also a continuum of equilibrium paths converging to another steady state moreover there can be cycles that are equilibrium paths even though the environment is stationary

data breaches and identity theft abstract an environment is analyzed in which agents join clubs payment networks in order to facilitate trade the networks compile personal identifying data pid so as to match transactors to transactions histories technological limitations cause the networks data management practices to impact each other s incidence and costs of identity theft too much data collection and too little security arise in equilibrium with noncooperative networks compared to the efficient allocation a number of potential remedies are analyzed 1 reallocations of data breach costs 2 mandated security levels and 3 mandated limits on the amount of data collected

optimal futures innovation in a dynamic economy the discrete time case abstract we study the optimal futures innovation in a dynamic economy and investigate how the results obtained in a static economy should be modified due to the possibility of dynamic trading we analyze three different notions of ex ante optimality depending on the authority s ability to redistribute wealth among the investors and characterize the optimal futures innovation in each sense journal of economic literature classification numbers d52 d60 g10

when energy storage reduces social welfare this paper examines the potential welfare effects of storage under different market structures this includes combinations of perfectly competitive and strategic generation and storage sectors and standalone and generator owned storage we demonstrate that if the generation sector is perfectly competitive and does not own storage then storage cannot be welfare diminishing otherwise generator owned storage or standalone storage in a market with strategic generating firms can reduce welfare compared to the no storage case this contradicts conventional wisdom that adding firms to an imperfectly competitive market typically reduces welfare losses

optimal incomplete markets with asymmetric information abstract this paper provides a simple parametric framework for comparing alternative incomplete asset structures in a productive economy focusing on the role of assets in allocating risk and transmitting private information it characterizes asset structures that are constrained efficient in the sense that no other asset structure with the same number of securities leads to a pareto dominating allocation in equilibrium specifically a constrained efficient asset structure must be efficient with respect to both risk sharing and information transmission explicit optimality criteria are developed and used to evaluate innovation by volume maximising futures exchanges journal of economic literature classification numbers g14 d52 d82

an hour ahead prediction model for heavy tailed spot prices abstract we propose an hour ahead prediction model for electricity prices that capture the heavy tailed behavior that we observe in the hourly spot market in the ercot texas and the pjm west hub grids we present a model according to which we separate the price process into a thin tailed trailing median process and a heavy tailed residual process whose probability distribution can be approximated by a cauchy distribution we show empirical evidence that supports our model

optimal energy commitments with storage and intermittent supply we formulate and solve the problem of making advance energy commitments for wind farms in the presence of a storage device with conversion losses mean reverting price process and an autoregressive energy generation process from wind we derive an optimal commitment policy under the assumption that wind energy is uniformly distributed then the stationary distribution of the storage level corresponding to the optimal policy is obtained from which the economic value of the storage as the relative increase in the expected revenue due to the existence of storage is obtained

credit and money in a search model with divisible commodities this paper examines the competition between money and credit in a search model with divisible commodities it is shown that fiat money can be valuable even though it yields a lower rate of return than the coexisting credit the competition between money and credit increases efficiency the monetary equilibrium with credit pareto dominates the monetary equilibrium without credit whenever the two coexist when a credit is repaid with money the competition also bounds the purchasing power of money from below by that of credit and so eliminates the weak inefficient monetary equilibrium found in previous search models with numerical examples three different monetary equilibria are ranked and the properties of the interest rate are examined

economic assessment of concentrated solar power technologies a review abstract this paper surveys economic assessments of concentrated solar power csp technologies and finds two dominant assessment methods a majority of studies reported in the literature are based on the levelized cost of electricity lcoe while a small subset of studies consider time varying meteorological and electricity market conditions several studies argue that lcoe undervalues dynamic flexibility provided by thermal energy storage and does not consider revenue opportunities provided by electricity markets at different time scales as a result some studies find that both lcoe and revenue can in fact be conflicting metrics for certain designs and market conditions this review finds strong variations in lcoe and revenue estimates in the literature as comparisons between csp and other generation technologies e g fossil wind and photovoltaic are dictated by the chosen economic metric it is imperative that policy and investment decisions should carefully consider time varying effects and flexibility finally research directions are proposed to increasing the fidelity of economic assessments and to mitigate discrepancies

the neighbor effect simulating dynamics in consumer preferences for new vehicle technologies abstract understanding consumer behaviour is essential in designing policies that efficiently increase the uptake of clean technologies over the long run expert opinion or qualitative market analyses have tended to be the sources of this information however greater scrutiny on governments increasingly demands the use of reliable and credible evidence to support policy decisions while discrete choice research and modeling techniques have been applied to estimate consumer preferences for technologies these methods often assume static preferences this study builds on the application of discrete choice research and modeling to capture dynamics in consumer preferences we estimate canadians preferences for new vehicle technologies under different market assumptions using responses from two national surveys focused on hybrid gas electric vehicles and hydrogen fuel cell vehicles the results support the relevance of a range of vehicle attributes beyond the purchase price in shaping consumer preferences towards clean vehicle technologies they also corroborate our hypothesis that the degree of market penetration of clean vehicle technologies is an influence on people s preferences the neighbor effect finally our results provide behavioural parameters for the energy economy model cims which we use here to show the importance of including consumer preference dynamics when setting policies to encourage the uptake of clean technologies

the role of liquidity in futures market innovations i characterize the optimal design of a new futures market an innovation by an exchange in the presence of market frictions futures markets am characterized by both the contract and the level of trader participation both can be determined by an exchange a game in which exchanges simultaneously design markets is c onsidered and a particular equilibrium not necessarily unique is constructed a game in which exchanges sequentially design markets and incur design costs is also considered and the generically unique equilibrium is constructed the nature of equilibrium with multiple exchanges is discussed in these simultaneous and sequential settings illustrating the role played by liquidity considerations both in market design and in the nature of competition between exchanges

risk constrained bidding and offering strategy for a merchant compressed air energy storage plant electricity price forecasts are imperfect therefore a merchant energy storage facility requires a bidding and offering strategy for purchasing and selling the electricity to manage the risk associated with price forecast errors this paper proposes an information gap decision theory igdt based risk constrained bidding offering strategy for a merchant compressed air energy storage caes plant that participates in the day ahead energy markets considering price forecasting errors price uncertainty is modeled using igdt the igdt based self scheduling formulation is then used to construct separate hourly bidding and offering curves the theoretical approach to develop the proposed strategy is presented and validated using numerical simulations

using storage capacity rights to overcome the cost recovery hurdle for energy storage energy storage is unique in that it can provide multiple services this feature raises cost recovery issues for storage due to the combination of competitive markets and ratebased cost recovery used in many power systems today this hybrid regulatory paradigm relies on classifying assets as providing competitively prices or unpriced services and handling cost recovery based on that classification some recent regulatory precedents suggest that storage developers must choose between classifying their assets as providing competitively priced or unpriced services in the former case storage costs must be recovered through the market if an asset is classified as providing only unpriced services costs can be recovered through the ratebase this regulatory design can hamper cost recovery for storage and may lead to inefficient storage investment and use we propose an alternate solution whereby storage capacity rights are auctioned to third parties that use their rights for priced or unpriced services storage capacity rights disentangle storage cost recovery from the regulatory treatment of its end use we formulate the storage capacity auction model and demonstrate how to efficiently price storage capacity rights we show that the revenues earned by the storage owner through the auction equals the imputed marginal value of storage capacity as revealed by the market bids

a comparative analysis of the value of pure and hybrid electricity storage significant natural gas and electricity price variation and volatility especially during the past few years raise questions about understanding the value drivers behind electricity storage the impact of these drivers for pure storage such as pumped hydroelectric storage and compressed air energy storage caes are different and in this paper we explore these differences in operation and net revenue over a variety of timescales we also consider the arbitrage value that is attainable in practice and explain why simple forecasting techniques based on historical data will generally be less successful for caes the breakeven cost of storage and how this can depend on regulatory treatment of storage and market structure is also considered

indivisibilities lotteries and monetary exchange we introduce lotteries randomized trading into search theoretic models of money in a model with indivisible goods and fiat money we show goods trade with probability 1 and money trades with probability where 1 iff buyers have sufficient bargaining power with divisible goods a nonrandom quantity q trades with probability 1 and again money trades with probability where 1 iff buyers have sufficient bargaining power moreover q never exceeds the efficient quantity not true without lotteries we consider several extensions designed to get commodities as well as money to trade with probability less than 1 and to illuminate the efficiency role of lotteries

economics of electric energy storage for energy arbitrage and regulation in new york unlike markets for storable commodities electricity markets depend on the real time balance of supply and demand although much of the present day grid operates effectively without storage cost effective ways of storing electrical energy can help make the grid more efficient and reliable we investigate the economics of two emerging electric energy storage ees technologies sodium sulfur batteries and flywheel energy storage systems in new york state s electricity market the analysis indicates that there is a strong economic case for ees installations in the new york city region for applications such as energy arbitrage and that significant opportunities exist throughout new york state for regulation services benefits from deferral of system upgrades may be important in the decision to deploy ees market barriers currently make it difficult for energy limited ees such as flywheels to receive revenue for voltage regulation charging efficiency is more important to the economics of ees in a competitive electricity market than has generally been recognized