the electricity generation adequacy problem assessing dynamic effects of capacity remuneration mechanisms abstract following liberalization reforms the ability of power markets to provide satisfactory incentives for capacity investments has become a major concern in particular current energy markets can exhibit a phenomenon of investment cycles which generate phases of under and over capacity and hence additional costs and risks for generation adequacy to cope with these issues new mechanisms called capacity remuneration mechanisms crm have been or will be implemented this paper assesses the dynamic effects of two crms the capacity market and the strategic reserve mechanism and studies to what extent they can reduce the investment cycles generation costs and shortage costs of both mechanisms are also compared to conclude on their effectivity and economic efficiency a simulation model based on system dynamics is developed to study the functioning of both crms and the related investment decisions the results highlight the benefits of deploying crms to solve the adequacy issue shortages are strongly reduced compared to an energy only market besides the capacity market appears to be more beneficial since it experiences fewer shortages and generation costs are lower these comparisons can be used by policy makers in particular in europe where these two crms are mainly debated to determine which crm to adopt

price formation in electricity forward markets and the relevance of systematic forecast errors since the liberalisation of the european electricity sector forward and futures contracts have gained significant interest of market participants due to risk management reasons for pricing of these contracts an important fact concerns the non storability of electricity in this case according to economic theory forward prices are related to the expected spot prices which are built on fundamental market expectations in the following article the crucial impact parameters of forward electricity prices and the relationship between forward and future spot prices will be assessed by an empirical analysis of electricity prices at the european energy exchange and the nord pool power exchange in fact price formation in the considered markets is influenced by historic spot market prices yielding a biased forecasting power of long term contracts although market and risk assessment measures of market participants and supply and demand shocks can partly explain the futures spot bias inefficiencies in the analysed forward markets cannot be ruled out

the effect of utility time varying pricing and load control strategies on residential summer peak electricity use a review abstract peak demand for electricity in north america is expected to grow challenging electrical utilities to supply this demand in a cost effective reliable manner therefore there is growing interest in strategies to reduce peak demand by eliminating electricity use or shifting it to non peak times this strategy is commonly called demand response in households common strategies are time varying pricing which charge more for energy use on peak or direct load control which allows utilities to curtail certain loads during high demand periods we reviewed recent north american studies of these strategies the data suggest that the most effective strategy is a critical peak price cpp program with enabling technology to automatically curtail loads on event days there is little evidence that this causes substantial hardship for occupants particularly if they have input into which loads are controlled and how and have an override option in such cases a peak load reduction of at least 30 is a reasonable expectation it might be possible to attain such load reductions without enabling technology by focusing on household types more likely to respond and providing them with excellent support a simple time of use tou program can only expect to realise on peak reductions of 5

the dynamics of the uk chemical plant investment cycle abstract orders for new chemical plant sanctions and investment in chemical plant both show marked business cycle like variations amongst the effects of the uk cycle on the chemical industry are variations in new plant additions requirements for capital expenditure finance and capital utilization as far as the uk process plant contractors and process plant manufacturers are concerned the cycle is reflected in a varying work load arising from the uk chemical industry together with varying manpower requirements and profitability the project described in this paper involved the construction of both system dynamics and control systems models of the investment cycle as a guide to strategic planning for the industries affected by it the implications of the results from both types of model for corporate and strategic planning in the industries concerned are discussed

demand response with locational dynamic pricing to support the integration of renewables abstract electricity production from centralised and decentralised renewable energy resources in europe is gaining significance resulting in operational challenges in the electricity system although these challenges add to the locational and time dependency of the underlying cost of operating the system this variability in time and location is not reflected in residential tariff schemes consequently residential users are not incentivised to react to varying system conditions and to help the integration of renewable energy resources therefore this paper provides a theoretical framework for designing a locational dynamic pricing scheme this can be used to assess existing tariff structures for consumption and injection and can serve as a theoretical background for developing new tariff schemes starting from the underlying costs this paper shows that the potential for locational dynamic pricing depends on the locational and time dependency of its cost drivers when converting costs into tariffs the tariff design should be determined this includes the advance notice of sending tariffs to users and the length of price blocks and price patterns this tariff design should find a balance between tariff principles related to costs practicality and social acceptability on the one hand and the resulting demand response incentive on the other

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

on the electrical two part tariff the brazilian perspective this paper discusses in terms of brazil s situation the use of a nonlinear pricing approach in the application of a two part tariff to electricity distribution networks the principles that uphold charging access and usage are to optimize energy systems that are based on a generation technology mix such a pricing approach is used in brazil where the generation mix is mainly hydro generation this study shows that in a case like brazil s a two part tariff may be used as a tool for network optimization the paper presents a design for a two part tariff for a distribution system with varying consumer behavior to validate the discussion we offer a numerical example finally remarks are given concerning pricing access and usage for low voltage level consumers

business case uncertainty of power plants in future energy systems with wind power abstract the european power sector is transforming due to climate policies and an increased deployment of intermittent res the sector will require thermal power plants for the decades to come but their business cases are negatively affected by this transformation this study presents a novel tool to quantify the effect of policy price and project related uncertainties on power plant business cases this tool can support policymakers in stimulating necessary investments in new thermal generation capacity we find that these investments are currently unsound power plants recoup on average 12 to 59 of their initial investment future climate policy i e the co 2 price has a very strong impact on business cases affects the profitability by 5 40 points the impact of the deployment of wind power is average 2 8 point difference between 10 and 21 wind penetration variations in annual wind power production barely affect the profitability variation of 1 point to stimulate new investments policymakers should first decrease the uncertainty in business cases caused by policy durable climate policy is especially important also policies to increase the profits of thermal power plants should be carefully considered and implemented this combined approach will reduce the revenue gap that needs to be bridged by supportive policies

a literature survey on energy growth nexus abstract this paper provides a survey of the recent progress in the literature of energy consumption economic growth and electricity consumption economic growth causality nexus the survey highlights that most empirical studies focus on either testing the role of energy electricity in stimulating economic growth or examining the direction of causality between these two variables although the positive role of energy on growth has become a stylized fact there are some methodological reservations about the results from these empirical studies a general observation from these studies is that the literature produced conflicting results and there is no consensus neither on the existence nor on the direction of causality between energy consumption electricity consumption and economic growth as a policy implication to avoid from conflicting and unreliable results the authors may use the autoregressive distributed lags bounds test two regime threshold co integration models panel data approach and multivariate models including new variables such as real gross fixed capital formation labor force carbon dioxide emissions population exchange rates interest rates etc thus the authors should focus more on the new approaches and perspectives rather than by employing usual methods based on a set of common variables for different countries and different intervals of time

optimal two part tariffs in a model of discrete choice abstract in this paper we study welfare optimal two part tariffs in a model of discrete choice the determinants of the sign and magnitude of the fixed and variable tax are analysed in terms of the nature and degree of consumer heterogeneity the price sensitivities of participation probabilities and conditional demands and the nature of distributional concerns in the absence of distributional concerns the model generalises the corrected ramsey rule for the variable tax and it shows that in the absence of collection or fixed participation costs the fixed fee may be negative the conditions that determine the sign of the participation fee turn out to have an intuitive economic interpretation finally the implications of distributional concerns for the optimal fixed and variable taxes are analysed

on the informational superiority of quantities over prices in the presence of an externality in this study we investigate the convexity of the profit function of a regulated firm with respect to the random shocks in the marginal costs and the demand intercept and its implications regarding information disclosure when these shocks are revealed to the firm at a future stage we illustrate that information disclosure is attained when the firm is regulated through the use of a quantity rather than a price instrument to do so we argue that increased convexity obtained under complete information is a sufficient condition as a policy implication we suggest a new argument which favors the use of quantities over prices these implications are more pronounced once we allow for multiple firms

dynamic climate policy with both strategic and non strategic agents taxes versus quantities we study a dynamic game where blocs of fossil fuel importers and exporters exercise market power using taxes or quotas a non strategic fringe of emerging and developing countries consume and produce fossil fuels cumulated emissions from fossil fuel consumption create climate damages we examine markov perfect equilibria under the four combinations of trade policies and compare these to the corresponding static games taxes dominate quotas for both the strategic importer and exporter the fringe is better off under taxes than quotas because taxes result in lower fuel prices and less consumption by the strategic importer lowering climate damages

commodity markets price limiters and speculative price dynamics abstract we develop a behavioral commodity market model with consumers producers and heterogeneous speculators to characterize the nature of commodity price fluctuations and to explore the effectiveness of price stabilization schemes within our model we analyze how nonlinear interactions between market participants can create either bull or bear markets or irregular price fluctuations between bull and bear markets through a global homoclinic bifurcation both the imposition of a bottoming price level to support producers or a topping price level to protect consumers can eliminate such homoclinic bifurcations and hence reduce market price volatility however simple policy rules such as price limiters may have unexpected consequences in a complex environment a minimum price level decreases the average price while a maximum price limit increases the average price in addition price limiters influence the price dynamics in an intricate way and may cause volatility clustering

modeling long term dynamics of electricity markets in the last decade many countries have restructured their electricity industries by introducing competition in their power generation sectors although some restructuring has been regarded as successful the short experience accumulated with liberalized power markets does not allow making any founded assertion about their long term behavior long term prices and long term supply reliability are now center of interest this concerns firms considering investments in generation capacity and regulatory authorities interested in assuring the long term supply adequacy and the stability of power markets in order to gain significant insight into the long term behavior of liberalized power markets in this paper a simulation model based on system dynamics is proposed and the underlying mathematical formulations extensively discussed unlike classical market models based on the assumption that market outcomes replicate the results of a centrally made optimization the approach presented here focuses on replicating the system structure of power markets and the logic of relationships among system components in order to derive its dynamical response the simulations suggest that there might be serious problems to adjust early enough the generation capacity necessary to maintain stable reserve margins and consequently stable long term price levels because of feedback loops embedded in the structure of power markets and the existence of some time lags the long term market development might exhibit a quite volatile behavior by varying some exogenous inputs a sensitivity analysis is carried out to assess the influence of these factors on the long run market dynamics

integration of price cap and yardstick competition schemes in electrical distribution regulation the disadvantages of traditional rate of return regulation for distribution tariffs have led to he development of new regulatory schemes to stimulate efficiency in the provision of the service under what has been called benchmark regulation the paper assesses the chilean model company regulation that aims at making the private distribution monopoly compete with a reference efficient model company through a yardstick competition approach it compares it with the price cap scheme used in electricity distribution in england and wales it contributes with a proposal to integrate both schemes the proposed hybrid methodology is developed and evaluated capturing the best characteristics of both regulatory schemes mathematical models to relate operational costs with electrical variables are developed

electricity portfolio management optimal peak off peak allocations electricity purchasers manage a portfolio of contracts in order to purchase the expected future electricity consumption profile of a company or a pool of clients this paper proposes a mean variance framework to address the concept of structuring the portfolio and focuses on how to optimally allocate positions in peak and off peak forward contracts it is shown that the optimal allocations are based on the difference in risk premiums per unit of day ahead risk as a measure of relative costs of hedging risk in the day ahead markets the outcomes of the model are then applied to show i that it is typically not optimal to hedge a baseload consumption profile with a baseload forward contract and ii that under reasonable assumptions risk taking by the purchaser is rewarded by lower expected costs

certification under oligopolistic competition in a symmetric duopolistic market where each firm s choice regarding certain quality attributes such as the environmental friendliness of its product is its own private information the extent of horizontal differentiation between firms plays a crucial role in a certifier s optimal certification policy under a non profit certifier it is always the case that both firms produce the highest quality and opt for certification this is also the case under a for profit certifier but only when the degree of horizontal differentiation is sufficiently high when horizontal differentiation is low the for profit certifier by charging a very high certification fee creates maximum vertical differentiation between firms as a result only one firm produces the highest quality and opts for certification whereas the other firm produces the lowest quality and does not opt for certification this asymmetry under a for profit certifier makes the market inefficient which provides one possible explanation for the existence of mostly non profit certifiers in such markets

integrating real options analysis with long term electricity market models abstract in liberalized electricity markets the investment postponement option is deemed decisive for understanding the addition of new generating capacity basically it refers to the possibility for investors to postpone projects for a period while waiting for the arrival of new and better information about the market evolution when such development involves major uncertainties the generation business becomes riskier and the investors wait and see behavior might limit the timely addition of new power plants in that sense the literature provides solid empirical evidence about the occurrence of construction cycles in the deregulated electricity industry however the strategic flexibility inherent to the option to defer new power plants has not yet been rigorously incorporated to investment signals in existing market models therefore this paper proposes a novel methodology to assess the long term development of liberalized power markets based on a more realistic approach for valuing generation investments the work is based on a stochastic dynamic market model built upon system dynamics simulation approach the decision making framework considers that the addition of new capacity is driven by the economic value of the strategic flexibility associated with deferring investments under uncertainties thus the value of the postponement option is quantified in monetary terms through real options analysis simulations confirm the cyclical behavior of the energy only market in the long run as suggested by the empirical evidence found in the literature in addition sensitivity analysis regarding some relevant exogenous variables depicts an even more fluctuating evolution of the capacity due to the combination of strong demand growth rates with large volatilities finally the model validity is assessed through a formal procedure according to the scope of system dynamics modeling approach

optimization and analysis of the profitability of tariff structures with two part tariffs abstract service providers often offer tariff structures with several two part tariffs that consist of a fixed fee and a usage price such that consumers may pick the tariff they prefer prices of tariffs have significant impacts on service providers profit because they simultaneously influence consumers tariff choices and their usage the number of tariffs also plays an important role because more tariffs segment the market better but also increase the administrative burden and require more marketing effort this article presents a mixed integer nonlinear programming optimization problem to determine profit maximizing tariffs compares several heuristic search methods in particular the gradient method stochastic search and simulated annealing to solve this problem analyses the profitability of different tariff structures and outlines the factors that drive differences in profitability across various tariff structures the results show that especially for large samples of more than 100 consumers simulated annealing performs best and deviates only 0 2 from the optimum structures with fewer two part tariffs are generally sufficient because additional two part tariffs only negligibly increase service providers profit

design of experiments applied to environmental variables analysis in electricity utilities efficiency the brazilian case abstract benchmarking plays a central role in the regulatory scene regulators set tariffs according to a performance standard and if the companies can outperform such a standard they can retain the gains observed by such outperformance efficiency performance is usually assessed by comparison or a benchmark against either other companies or the company s own historical performance this paper discusses the impact of environmental variables on the efficiency performance of electricity distribution companies indeed such variables which are argued to be unmanageable may affect the electricity utilities performance thus this paper proposes a simulation methodology based on design of experiment philosophy for statistically testing environmental variables and the interactions among them enabling regulators to build the best suited semi parametric two stage model of electricity utility benchmarking analysis to demonstrate the power of the proposed approach experimental simulations are carried out using real data published by brazil s regulator the results show that environmental variables may impact efficiency performance linearly and nonlinearly

residential implementation of critical peak pricing of electricity this paper investigates how critical peak pricing cpp affects households with different usage and income levels with the goalof informing policy makers who are considering the implementation of cpptariffs in the residential sector using a subset of data from thecalifornia statewide pricing pilot of 2003 2004 average load changeduring summer events annual percent bill change and post experimentsatisfaction ratings are calculated across six customer segments categorized by historical usage and income levels findings show thathigh use customers respond significantly more in kw reduction than dolow use customers while low use customers save significantly more inpercentage reduction of annual electricity bills than do high usecustomers results that challenge the strategy of targeting only high usecustomers for cpp tariffs across income levels average load and billchanges were statistically indistinguishable as were satisfaction ratesresults that are compatible with a strategy of full scale implementationof cpp rates in the residential sector finally the high use customersearning less than 50 000 annually were the most likely of the groups tosee bill increases about 5 percent saw bill increases of 10 percent ormore suggesting that any residential cpp implementation might considertargeting this customer group for increased energy efficiencyefforts

trends and cycles in the net barter terms of trade a new approach this study has two objectives first it uses time series techniques including unit root tests to reexamine the classic prebisch singer hypothesis that the relative prices of primary commodities in terms of manufactured goods are characterized by secular deterioration second commodity price movements are decomposed into permanent and cyclical components using the beveridge and nelson 1981 technique the latter information is valuable when assessing the viability of commodity stabilization funds and formulating countercyclical macroeconomic policy responses to commodity booms and busts copyright 1989 by royal economic society

incentives and effects of no lose targets to include non annex i countries in global emission reductions we analyze the potential of no lose targets used as an instrument to integrate non annex i countries in global emission reduction efforts we set up a game theoretical model to derive the participation conditions for a non annex i country and evaluate the effect of a no lose target on the reduction of global emissions our analyses show that meaningful contributions from non annex i countries are possible but their contribution to global emission reductions is limited and depends on several factors ambitious targets for the annex i countries are a precondition further determining factors are differences in the abatement potentials between annex i and non annex i countries and market power on the certificate market nonetheless in contrast to other funding mechanisms no lose targets rather than requiring additional funding can actually reduce costs for the annex i countries

network economics and the environment insights and perspectives local interactions and network structures appear to be a prominent feature of many environmental problems this paper discusses a wide range of issues and potential areas of application including the role of relational networks in the pattern of adoption of green technologies common pool resource problems characterized by a multiplicity of sources the role of social networks in multi level environmental governance infrastructural networks in the access to and use of natural resources such as oil and natural gas the use of networks to describe the internal structure of inter country relations in international agreements and the formation of bilateral links in the process of building up an environmental coalition for each of these areas we examine why and how network economics would be an effective conceptual and analytical tool and discuss the main insights that we can foresee

the impact of investors risk aversion on the performances of capacity remuneration mechanisms abstract this paper analyses the impact of risk aversion on the performances of capacity remuneration mechanisms with investors facing an uncertain peak load three market designs are studied for this purpose a competitive energy only market a capacity market and a strategic reserve mechanism a simulation model based on system dynamics is developed in order to represent investment decisions and analyse the behaviour of each market design risk aversion is modelled through the computation of conditional value at risk the results are discussed in terms of impact on the reliability ability to limit shortages and cost total generation costs of the studied market designs when comparing the three market designs the capacity market seems to be the least affected by the introduction of risk aversion both in terms of cost and reliability this result suggests that implementing a capacity market is preferable in order to deal with the adverse effects of risk aversion given the simulations and parameters that were used

crisis sustainability of electricity prices and state interventions in argentina this article examines the sustainability of wholesale power prices following the 2001 economic crisis in argentina we depart from the contractual disputes between the multinational power generating companies and the state of argentina arising from price and investment interventions after the economic crisis then we move on to argue that these sector specific measures were inevitable once some of the key macroeconomic policies such as the currency board system were discarded using an error correction method and estimating a counterfactual price series we demonstrate that in the absence of changes in the price determination method and direct public investment the level and the volatility of power prices would have been much higher with further knock on effects on the rest of the economy copyright 2012 the author 2011 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

a rent seeking model of voluntary overcompliance we provide an explanation for voluntary overcompliance the phenomenon in which firms voluntarily choose to overcomply with environmental regulations in our model a polluting firm faces a rent seeking contest with an environmental group by making a small concession beforehand i e by overcomplying voluntary the firm lowers the stake the environmental group has in the rent seeking contest which lowers the group s lobbying effort in that contest voluntary overcompliance increases social welfare yet the firm undersupplies overcompliance from a welfare point of view an increase in the effectiveness of lobbying of the environmental group increases the level of overcompliance

cycles in deregulated electricity markets empirical evidence from two decades abstract in this article we discuss the cycle hypothesis in electricity generation which states that the introduction of deregulation in an electricity system might lead to sustained fluctuations of over and under capacity the occurrence of cycles is one of the major threats for electricity markets as it affects the security of supply and creates uncertainty in both the profitability of electricity companies and in consumer prices we discuss the background for these cycles using analogies with other capital intensive industries along with evidence from the analysis of behavioral simulation models as well as from experimental electricity markets using data from the oldest deregulated markets we find support for the hypothesis in the case of the english and chilean markets based on an autocorrelation analysis evidence from the nordpool market is more ambiguous although we might be observing the first half of a cycle in generation capacity comparing a simulation of the english market performed in 1992 with the actual performance we can observe that the qualitative behavior of the model is consistent with the actual evolution finally we discuss possible mechanisms for damping cycles in electricity generation such as mothballing capacity payments and reliability markets

consumer behaviour with environmental and social externalities implications for analysis and policy in this paper we summarise some of our recent work on consumer behaviour drawing on recent developments in behavioural economics particularly linked to sociol ogy as much as psychology in which consumers are embedded in a social context so their behaviour is shaped by their interactions with other consumers for the purpose of this paper we also allow consumption to cause environmental damage analysing the social context of consumption naturally lends itself to the use of game theoretic tools we shall be con cernedwithtwowaysinwhichsocialinteractionsaffectconsumerpreferencesandbehaviour socially embeddedpreferences wherethebehaviourofotherconsumersaffectanindividual s preferences and hence consumption we consider two examples conspicuous consumption and consumption norms and socially directed preferences where people display altruistic behaviour our aim is to show that building links between sociological and behavioural eco nomic approaches to the study of consumer behaviour can lead to significant and surprising implications for conventional economic analysis and policy prescriptions especially with respect to environmental policy

identifying electricity saving potential in rural china empirical evidence from a household survey in recent years there has been a fast growing body of literature examining energy saving potential in relation to electricity however empirical studies focusing on non western nations are limited to fill this gap this study intends to examine the electricity saving potential of rural households in china using a unique data set from the china residential electricity consumption survey crecs in collaboration with the china general social survey cgss conducted nationwide at the household level in rural china we use a stochastic frontier model which allows us to decompose residential electricity consumption into the minimum necessary amount of consumption based on physical characteristics e g house size house age number of televisions or refrigerators and estimate the consumption slack i e the amount of electricity consumption that could be saved which depends on various factors we find that rural households in china are generally efficient in electricity saving and the saving potential is affected by fast information feedback and social demographic characteristics instead of by the averaged electricity price or energy efficiency labelling signals in addition we find no evidence of regional heterogeneity on electricity saving potential for rural households policy implications are derived

bargaining and international environmental agreements this article surveys game theoretic papers focused on the negotiation process that leads to an international environmental agreement most of the papers considered apply bargaining theory although other approaches have been considered as well among other issues the papers considered analyze the burden sharing rule that will result from a negotiation over a global public good the role of information asymmetries the impact of unilateral commitments delegation and ratification whether or not countries are going to form groups during the negotiation process and the influence of the expectation of a future bargaining process on investment decisions the basic bargaining model is optimistic as it predicts that countries will reach an efficient agreement immediately however all the developments of this model surveyed afterwards are rather pessimistic and even the basic model has perverse incentives for pre negotiation signals

sensitivity of reserve margin to factors influencing investment behaviour in the electricity market of england and wales abstract the electricity generation and distribution industries of england and wales have recently undergone major re structuring as part of the privatization process of taking them out of the public sector on the generation side three major companies have been created which compete both with each other and with the new independent companies who are expected to enter the market trading between generators and distributors is controlled centrally by a pool system which attempts to ensure the optimal operation of the system in the short term and gives a pricing signal for longer term investment this pricing signal depends upon an a priori loss of load probability this paper is intended to provide insights into how the investment in capacity for generation could evolve according to various regulatory conditions economic assumptions degrees of competition and the strategic behaviour of the separate companies using a system dynamics approach a simulation model of investment is developed to generate insights into the volatility of the reserve margin variations in the loss of load probability and the various market share scenarios the degree of uncertainty in the demand the amount of information exchange between competitors and the degree of foresight in planning are considered as well as different financial or market share objectives for companies

from nuclear phase out to renewable energies in the swiss electricity market abstract liberalisation and the ever larger share of variable renewable energies vres e g photovoltaic pv and wind energy affect security of supply sos we develop a system dynamics model to analyse the impact of vres on the investment decision process and to understand how sos is affected we focus on the swiss electricity market which is currently undergoing a liberalisation process and simultaneously faces the encouragement of vres and a nuclear phase out our results show that nuclear production is replaced mainly by pv and imports the country becomes a net importer this evolution points to a problem of capacity adequacy the resulting price rise together with the subsidies needed to support vres lead to a rise in tariffs in the presence of a high share of hydro the de rated margin may give a misleading picture of the capacity adequacy we thus propose a new metric the annual energy margin which considers the energy available from all sources while acknowledging that hydro storage can function as a battery this measure shows a much less reassuring picture of the country s capacity adequacy

electricity tariff design for transition economies application to the libyan power system this paper presents a general electricity tariff design methodology especially applicable for transition economies these countries are trying to modernize their power systems from a centralized environment with normally a public vertically integrated electric company to a liberalized framework unbundling electricity companies and eventually starting a privatization process two issues arise as crucial to achieving a successful transition i ensuring cost recovery for all future unbundled activities generation transmission distribution and retailing and ii sending the right price signals to electricity customers avoiding cross subsidies between customer categories the design of electricity tariffs plays a pivotal role in achieving both objectives this paper proposes a new tariff design methodology that complying with these two aforementioned criteria requires a low amount of information regarding system data and customer load profiles this is important since typically volume and quality of data are poor in those countries the presented methodology is applied to computing tariffs for the libyan power system in 2006 using real data

distribution charges for consumers and microgeneration considering load elasticity sensitivity abstract this paper presents an approach for calculating a tariff for electrical energy distribution systems the methodology is similar to the standard tariff calculation method used in brazil the approach combines the concepts of time of use tariffs and ramsey prices the process initially designed for energy consumers can be used to establish tariffs for micro generation units the resulting regulated distribution tariffs for both consumer and generation units has an hourly signal associated with long run marginal costs moreover while minimizing any loss of social benefits the tariffs comply with the revenue reconciliation constraint the proposed approach is applied to a real brazilian distribution system and compared to the current procedure used by the brazilian electricity regulatory agency

equity as a prerequisite for stability of cooperation on global public good provision analysing cooperative provision of a global public good such as climate protection we explore the relationship between equitable burden sharing on the one hand and core stability on the other to assess the size of the burden which a public good contribution entails for a country we make use of a specific measure based on moulin econometrica 55 963 977 1987 in particular we show that a pareto optimal allocation which is not in the core can always be blocked by a group of countries with the highest moulin sacrifices in this sense it is the overburdening and thus unfair treatment of some countries that provides the reason for core instability by contrast a pareto optimal allocation is in the core if the public good contributions are fairly equally distributed according to their moulin sacrifices the potential implications of our theoretical analysis for global climate policy are also discussed

the environmental paradox in generation how south america is gradually becoming more dependent on thermal generation there has been an increasing focus on global warming emission of green house gases ghg and the problems this might create in this article we review the trend in sustainable and renewable electricity generation in south america where the generation portfolio increasingly depends on thermal generation in particular gas south america is a region that has relatively low emissions but the current development is not desirable in environmental terms we analyze the underlying reasons for this development which is related to security of supply deregulation and the cost of renewable energy we review and discuss the policies to promote renewables in the region we analyze the potential advantages and drawbacks of different types of market interventions such as direct subsidies that create potentially strong market distortions more sophisticated market interventions that might be less intrusive but not necessarily as effective as e g firm energy markets we also review market based solutions such as the clean market mechanism and its potential and the use of renewable electricity in non interconnected zones which might be one of the most economically attractive applications of renewables however without a stronger and more aggressive intervention from the governments in the region it is unlikely that the increase in thermal generation can be stopped

the mexican electricity sector policy analysis and reform 1992 2009 this article analyses the cause effect relation of the structural reform in the mexican electricity sector called the public electricity service act from 1992 to 2009 one of the main arguments of the reform is to attract private investment in order to reduce the financial load of the government in infrastructure for the development of the national electric power system by means of six modalities power self supply cogeneration small power production independent power production power export and power import the article presents the global context of reforms adopted in 1990 the major policies and events are presented in chronological order before and after reform in addition it analyses the new institutional framework the evolution of modalities technologies of electricity generation and tariffs the main conclusion is that the result of reform could be considered a partial progress the independent power production modality shows greater participation while power self supply and cogeneration are lower the subsidy policy is maintained progress is needed in policies and strengthening and also in updating regulatory and normative frameworks

how capacity mechanisms drive technology choice in power generation the case of colombia abstract colombia enacted its first legal framework for promoting alternative energies in 2001 and a second framework in 2014 since the generation technology mix has not changed since 2000 there is a need to understand how regulation and market structure affect the adoption of technologies in this paper we address the question of what has been the impact of the capacity mechanisms adopted during the 2000s on technology choices for power generation in colombia our approach is to analyze the evolution of market structure and regulation we found that regulatory uncertainty and low prices drove a surge of small hydro plants during the 2000s during the 2010s the new regulatory focus on reliability of supply has resulted in increased coal fueled generation and large hydro this increased reliance on hydro power can further delay the entry of renewable technologies and the diversification of the colombian portfolio

egalitarian equivalent cost sharing of a public good in an economy with one public and one private good egalitarian equivalent cost sharing consists of finding the highest public good level x such that consuming x for free yields a feasible utility distribution the corresponding feasible allocation typically unique called egalitarian equivalent is in the core of the economy conversely any cost sharing method satisfying pareto optimality cost monotonicity nobody suffers a utility loss if the production technology improves upon ceteris paribus and individual rationality no single agent coalition objects or no private transfers no agent receives a positive amount of private good must select an egalitarian equivalent allocation in every economy copyright 1987 by the econometric society

competitive storage and commodity price dynamics by buying cheap and selling dear risk neutral commodity speculators can smooth commodity prices and induce serial dependence in price even when none would exist under a simple process of supply and demand commodity prices are variable and strongly positively correlated from one year to the next the variability is often explained by supply factors and the autocorrelation by the activities of speculators we show that this explanation is not consistent with the evidence speculation can substantially increase autocorrelation for prices that are weakly autocorrelated in its absence but not to the high levels that are observed in the data

a model of commodity prices after sir arthur lewis we develop an idea from arthur lewis paper on unlimited supplies of labor to model the longrun behavior of the prices of primary commodity produced by poor countries commodity supply is assumed infinitely elastic in the long run and the rate of growth of supply responds to the excess of the current price over the long run supply price demand is linked to the level of world income and to the price of the commodity so that price is stationary around its supply price and commodity supply and world income are cointegrated the model is fitted to long run historical data d 2003 elsevier science b v all rights reserved

reliability payments to generation capacity in electricity markets abstract electric power is a critical input to modern economies generation adequacy and security of supply in power systems running under competition are currently topics of high concern for consumers regulators and governments in a market setting generation investments and adequacy can only be achieved by an appropriate regulatory framework that sets efficient remuneration to power capacity theoretically energy only electricity markets are efficient and no additional mechanism is needed nonetheless the energy only market design suffers from serious drawbacks therefore jointly with the evolution of electricity markets many remunerating mechanisms for generation capacity have been proposed explicit capacity payment was the first remunerating approach implemented and perhaps still the most applied however this price based regulation has been applied no without severe difficulties and criticism in this paper a new reliability payment mechanism is envisioned capacity of each generating unit is paid according to its effective contribution to overall system reliability the proposed scheme has many attractive features and preserves the theoretical efficiency properties of energy only markets fairness incentive compatibility market power mitigation and settlement rules are investigated in this work the article also examines the requirements for system data and models in order to implement the proposed capacity mechanism a numerical example on a real hydrothermal system serves for illustrating the practicability of the proposed approach and the resulting reliability payments to the generation units

an improved mechanism for capacity payment based on system dynamics modeling for investment planning in competitive electricity environment many countries have experienced restructuring in their electric utilities this restructuring has presented the power industries with new challenges the most important of which is long term investment planning under uncertain conditions this paper presents an improved mechanism for capacity payment the mechanism has been investigated based on system dynamic modeling in our proposed mechanism generators will recover a part of their investment through capacity payment while the payment for any plant remains constant during the operation period it depends on the investment needed to build it the main factors affecting long term planning have been considered in our model the approach can be used to investigate the effects of fixed as well as variable capacity payment in market investment we used the probability density function of load as a new concept to calculate average market price delays in unit constructions estimation of demand and market capacity growth during construction periods have been included in the proposed algorithm as parameters which affect the regulator s decision for changing capacity payment the model can be used by regulators to investigate strategies that may affect the fluctuations in the market

commodity prices and growth in africa a frican economies export primary commodities and most export little else policymakers as well as economists and historians of african economic development have seen these exports as both a hope and a curse the following parable tells the story once upon a time a servant of the ruler discovered a miraculous plant which grew readily in that country and whose seeds could be woven into fine cloth so desirable was this fabric that it became prized all over the world and fetched a high price after two score years the plant accounted for most of the country s trade with the world the ruler ordered the peasants to grow the plant paid them only a fraction of its price and he and his nobles became fabulously wealthy because the ruler wished to be remembered as a great ruler and as the father of his country he used his wealth to build a great army and brought machines from foreign countries to make the fine goods that previously could only be obtained from foreign merchants but the machines often broke down and the goods that they made were of poor quality and after the ruler died they were left to rust under the ruler s successor there was a war in a foreign land where the plant also grew so that there was a great shortage and its price increased threefold in only three seasons the new ruler spent his newfound riches on fantastic extravagance while immense sums were expended on public works after the manner of the east and on productive works carried out in the wrong way or too soon not even the threefold increase in prices could support these expenditures and the country soon found itself deeply in debt when the war ended and the price fell the country could no longer pay the interest on its debt or borrow more money even after it had sold its only useful public work to a foreign power so that power sent a mission to the country the publication of whose report from which the above

how to benefit from a common european electricity market design abstract the realization of an internal electricity market in europe is currently on the one hand progressing in particular thanks to the wide spread implementation of market coupling solutions for cross border congestion management on the other hand diverging national market designs pose a threat to the continuation of this process given the challenges to electricity market design in a multi regional context we analyze how different design aspects namely cross border congestion management and capacity mechanisms affect welfare and generation adequacy in europe in doing so we rely on an agent based simulation model for electricity wholesale markets which we apply within several numerical computational case studies for the region of central western europe 2012 2030 our results confirm the benefits of market coupling in terms of welfare as well as generation adequacy furthermore we find indications that coordinating market designs across regions supports these targets therefore we recommend that european energy policy forms a stable transparent regulatory framework with cross border market coupling as an integral component in this context energy policy targets should be clearly defined and operationalized which also needs to consider potential conflicts between them finally electricity market designs need to be coordinated among states to benefit most from a common european market

booms and slumps in world commodity prices abstract this paper examines the duration and magnitude of cycles in world commodity prices cycles are a dominant feature of commodity prices and dealing with the economic consequences of booms and slumps in prices continues to be one of the most challenging issues facing policymakers in commodity exporting developing countries we find that there is an asymmetry in commodity price cycles as price slumps last longer than price booms how far prices fall in a slump is found to be slightly larger than how far they tend to rebound in a subsequent boom in addition for most commodities the probability of an end to a slump boom in prices is independent of the time already spent in the slump boom

long term assessment of power capacity incentives by modeling generation investment dynamics under irreversibility and uncertainty abstract in actual energy only markets the high volatility of power prices affects the expected returns of generators when dealing with irreversibility under uncertainty deferring decisions to commit in new power plants waiting for better information is therefore a rational approach theoretical and empirical evidence suggests that such investment pattern determines the occurrence of construction cycles which strongly compromise supply security in order to supplement generators revenues several remuneration mechanisms have been devised over past years along this line this work addresses the long run dynamics of capacity adequacy and market efficiency with both a price based and a quantity based capacity remuneration policy for that purpose a recently developed stochastic simulation model is used as a benchmark hence the optimal postponement of generation investment decisions is integrated into a long run power market model by formulating the decision making problem in the framework of real options analysis results suggest that policymakers may exchange supply security effectiveness for energy prices to be paid by consumers efficiency when designing and implementing capacity remuneration mechanisms by doing so this article contributes to the ongoing debate regarding the design of incentive policies and efficient power markets by considering the microeconomics of investors decision making under irreversibility and uncertainty