what drives deregulation economics and politics of the relaxation of bank branching restrictions this paper investigates private interest public interest and political institutional theories of regulatory change to analyze state level deregulation of bank branching restrictions using a hazard model we find that interest group factors related to the relative strength of potential winners large banks and small bank dependent firms and losers small banks and the rival insurance firms can explain the timing of branching deregulation across states during the last quarter century the same factors also explain congressional voting on interstate branching deregulation while we find some support for each theory the private interest approach provides the most compelling overall explanation of our results

the political economy of corporate control and labor rents in a democracy a political majority can influence both the corporate governance structure and the return to human and financial capital we argue that when financial wealth is sufficiently concentrated there is political support for high labor rents and a strong governance role for banks or large investors the model is consistent with the great reversal phenomenon in the first half of the twentieth century we offer evidence that in several financially developed countries a financially weakened middle class became concerned about labor income risk associated with free markets and supported a more corporatist financial system

the politics of financial development evidence from trade liberalization incumbents in various industries have different incentives to promote or oppose financial development changes in the relative strength of promoter and opponent industries thus result in changes in the political equilibrium level of financial development we conduct an event study using a sample of 41 countries that liberalized trade during 1970 to 2000 and show that the strengthening of promoter relative to opponent industries resulting from liberalization is a good predictor of subsequent financial development the benefits of developing the financial system are insufficient for financial development and rents in particular hands appear to be necessary to achieve it copyright c 2008 by the american finance association

optimal allocation of energy sources for sustainable development in south korea focus on the electric power generation industry abstract national energy planning has become increasingly complex owing to a pressing need to incorporate sustainability considerations in this context we applied least cost and cost risk optimization models to allocate energy sources for sustainable development in the korean electric power generation industry the least cost model determined an electricity generation mix from 2012 to 2030 that incurs minimum generation cost to meet electricity demand the cost risk model determined electricity generation mixes in 2030 considering the risks associated with each energy source in order to lessen external risks in deriving these optimal electricity generation mixes we considered both conventional and renewable energy sources in conjunction with physical and policy constraints that realistically reflect korean circumstances moreover we accounted for co 2 and external costs within the electricity generation costs for each energy source for sustainable development in korea we conclude that a portion of the coal and gas in the electricity generation mix must be substituted with nuclear and renewable energy furthermore we found that least cost allocation is sub optimal from cost risk perspective and that it limits the adoption of renewables finally we also discuss the implications of decisions taken by the korean government regarding the electricity generation mix for next generation energy planning to achieve sustainability

the finance growth nexus evidence from bank branch deregulation this paper provides evidence that financial markets can directly affect economic growth by studying the relaxation of bank branch restrictions in the united states we find that the rates of real per capita growth in income and output increase significantly following intrastate branch reform we also argue that the observed changes in growth are the result of changes in the banking system improvements in the quality of bank lending not increased volume of bank lending appear to be responsible for faster growth

investment risks in power generation a comparison of fossil fuel and renewable energy dominated markets abstract due to their high capital intensity weather dependent renewable energies res such as solar and wind face considerable investment risks in power markets in addition their uncertain production volumes also affect the investment risks of other plant types through the impact on power prices and residual demand increasing res shares thus potentially increase overall investment risks in power markets which many analysts consider to be a potential problem against this background this paper compares investment risks of different technologies in markets with increasing shares of variable res it further analyses how generation mixes are affected by these investment risks if the risks are evaluated on a stand alone basis or in a plant portfolio context of a private firm for this purpose a stylized investment and dispatch model is used to conduct monte carlo simulations from which risk measures are derived the results show that capital intensive res face the highest stand alone risks since their profits are most affected by the power price risk however the results further indicate that the stand alone risks of variable res decrease with their share in the market because of a negative correlation of output and price risk in addition res have a risk benefit in firm plant portfolios in terms of constituting a hedge against losses of fossil fuel plants this positive portfolio effect however rapidly decreases and becomes negative with increasing res shares in the market

evaluation of the long term power generation mix the case study of south korea s energy policy abstract this paper presents a practical portfolio model for the long term power generation mix problem the proposed model optimizes the power generation mix by striking a trade off between the expected cost of power generation and its variability we use monte carlo simulation techniques to consider the uncertainty associated with future electricity demand fuel prices and their correlations and the capital costs of power plants unlike in the case of conventional power generation mix models we employ cvar conditional value at risk in designing variability to consider events that are rare but enormously expensive a comprehensive analysis on south korea s generation policy using the portfolio model shows that a large annual cost is additionally charged to substitute a portion of nuclear energy with other alternatives nonetheless if korea has to reduce its dependency on nuclear energy because of undermined social receptivity from the fukushima disaster it turns out that lng or coal could be a secure candidate from an economic perspective

a portfolio risk analysis on electricity supply planning abstract conventional electricity planning selects from a range of alternative technologies based on the least cost method without assessing cost related risks the current approach to determining energy generation portfolios creates a preference for fossil fuel consequently this preference results in increased exposure to recent fluctuations in fossil fuel prices particularly for countries heavily depend on imported energy this paper applies portfolio theory in conventional electricity planning with taiwan as a case study the model objective is to minimize the risk weighted present value of total generation cost both the present value of generating cost and risk variance of the generating cost are considered risk of generating cost is introduced for volatile fuel prices and uncertainty of technological change and capital cost reduction the impact of risk levels on the portfolio of power generation technologies is also examined to provide some valuable policy suggestions study results indicate that replacing fossil fuel with renewable energy helps reduce generating cost risk however due to limited renewable development potential in taiwan there is an upper bound of 15 on the maximum share of renewable energy in the generating portfolio in the meantime reevaluating the current nuclear energy policy for reduced exposure to fossil fuel price fluctuations is worthwhile

analyzing korean consumers latent preferences for electricity generation sources with a hierarchical bayesian logit model in a discrete choice experiment generally consumers use electricity without considering the source the electricity was generated from since different energy sources exert varying effects on society it is necessary to analyze consumers latent preference for electricity generation sources the present study estimates korean consumers marginal utility and an appropriate generation mix is derived using the hierarchical bayesian logit model in a discrete choice experiment the results show that consumers consider the danger posed by the source of electricity as the most important factor among the effects of electricity generation sources additionally korean consumers wish to reduce the contribution of nuclear power from the existing 32 11 and increase that of renewable energy from the existing 4 32

privatization in eastern europe irreversibility and critical mass effects abstract this paper proposes a model to shed light on two important policy features of privatization in central and eastern europe the idea of a necessary critical mass of privatization on one hand and the great difficulties encountered in the actual privatization process on the other the model incorporates a positive externality related to the size of the private sector multiple equilibria may arise for political and economic reasons policies of free distribution are analysed with the model they may eliminate the danger of policy reversals due to excess unemployment but may at the same time increase the relative cost of restructuring leading in some cases to pareto inferior outcomes

governing a groundwater commons a strategic and laboratory analysis of western water law we examine strategic behavior in groundwater depletion within the setting of state governance of groundwater resources in the american west solving a dynamic common pool resource model for its optimal solution and its subgame perfect equilibrium provides benchmarks for behavior observed in laboratory experiments three forms of legal rules common pool depletion with a rule of capture to establish ownership absolute ownership doctrine entry restrictions prior appropriation doctrine and stock quotas correlative rights doctrinekre examined in terms of their impact on individual strategic behavior in laboratory experiments

financial markets the pattern of industrial specialization and comparative advantage evidence from oecd countries due to underlying technological and organizational differences industries differ in their need for external finance since services provided by the financial sector are largely immobile across countries the pattern of industrial specialization should be influenced by the level of financial development among oecd countries we find a strong causal effect of the financial sector on industrial specialization further the financial sector is a source of comparative advantage in a way consistent with the hecksher ohlin vanek model results are also presented on which aspects of financial systems are important for specialization and comparative advantage

impact assessment of renewable generation on electricity demand characteristics abstract in response to variation generation of renewable resources it is necessary to assess the impacts on electricity demand characteristics renewable resources under consideration are photovoltaic wind small hydro biomass and biogas it is proposed to treat renewable generation as negative load electricity demand is characterized by using peak demand energy demand and load factor as well as it is divided into three groups peak intermediate and base variation of renewable generation is expressed through a concept of net load changes of demand characteristics can be analyzed from annual and seasonal changes of load duration curves after integrating renewable resources the impacts on demand characteristics and load groups have meaningful implication on operating costs numerical results were obtained by using hourly load data and generation portfolio of thailand

optimal investment portfolio in renewable energy the spanish case abstract this article presents a model for investing in renewable energies in the framework of the spanish electricity market in a way that risk is minimised for the investor while returns are maximised the model outlined here is based on an economic model for calculating cash flows intended to obtain the internal rate of return irr of the different energies being studied wind photovoltaic mini hydro and thermo electrical the irrs obtained are considered the returns on investments while their standard deviations are considered associated risks in order to minimise risk a comprehensive portfolio of investments is created that includes all of the available energies by means of a system of linear equations the solution of the linear system is graphically checked using the efficient frontier method for the different financing options several case studies within the renewable energies plan per is its spanish abbreviation that is in force in spain in the period 2005 2010 are analysed in order to illustrate the method as are other case studies using different types of financing helping us to reach the pertinent conclusions

the profitability concentration relation market power or efficiency industrial economists have been studying the relationship between profitability and concentration using cross industry samples for many years now however as sometimes happens once it appeared that some consensus had been achieved with few exceptions market concentration and industry profitability are positively correlated peltzman i977 p 229 people began to question the interpretation of those results in particular demsetz e g i973 i974 and others suggested that rather than concentration market power leading to higher prices and profits the causal direction in fact ran from greater efficiency to both higher profits and incidentally to higher concentration our purpose here is to subject these conflicting hypotheses to cross industry empirical test using u k data in order to do this we first develop a model which is sufficiently general to allow for both alternative explanations of a positive concentration profitability correlation in the light of this model we then examine the implications for the within industry relation between market share and firm level profitability more specifically we explore demsetz s claim that the empirical form of this relationship should signal which of the alternative hypotheses is consistent with the between industry profitability concentration correlation our model suggests that in certain special circumstances this claim is partly justified in that it should be possible to assess the relative strengths of the market power and efficiency effects from the within industry relation more generally however factors such as product differentiation and scale economies may seriously impair the information content of the relation with at least a strong suspicion that the estimates will tend to exaggerate the evidence in favour of the efficiency hypothesis in the event our results tend to confirm that for most industries the within industry data offer little conclusive support for either hypothesis but for a not insignificant minority of industries the evidence suggests some support for the view that both efficiency and market power are at work simultaneously our model is detailed in section ii and estimated on u k data in section iii after which we offer a few comments in section iv first however we drovide a backcloth to the later analysis

investment planning in electricity production under co2 price uncertainty the electricity markets have undergone significant changes during the last years on the one hand the market deregulation has increased significantly the uncertainty on future electricity prices on the other hand the kyoto protocol and the establishment of emission restrictions as well as the development of emission trading systems has added another expense stream for conventional fuel electricity producers and a potential income stream for renewable electricity producers the emission allowance prices are another source of uncertainty for electricity producers the scope of this work is to investigate the effect that various scenarios for emission allowance price evolution may have on the orders for new electricity generation technologies and therefore on the future electricity generation mix of greece the renewable energy generation targets are taken into consideration as a constraint of the system and the learning rates of the various technologies are included in the calculations the national electricity generation system is modelled for long term analysis and an optimisation method is applied in order to come up with the optimal generating mix that minimises electricity generation cost while satisfying the national emissions reduction targets and incorporating the uncertainty of emission allowance prices in addition an investigation is made to identify if a point should be expected when renewable energy will be more profitable than conventional fuel electricity generation the work is interesting for investment planning in the electricity market as it may provide directions on which technologies are most probable to dominate the market in the future and therefore are of interest to be included in the future power portfolios of related investors

cvar constrained planning of renewable generation with consideration of system inertial response reserve services and demand participation abstract integration of renewable generation can lead to both diversification of energy sources which can improve the overall economic performance of the power sector and cost increase due to the need for further resources to provide flexibility and thus secure operation from unpredictable variable and asynchronous generation in this context we propose a cost risk model that can properly plan generation and determine efficient technology portfolios through balancing the benefits of energy source diversification and cost of security of supply through the provision of various generation frequency control and demand side services including preservation of system inertia levels we do so through a scenario based cost minimization framework where the conditional value at risk cvar associated with costs under extreme scenarios of fossil fuel prices combined with hydrological inflows is constrained the model can tackle problems with large data sets e g 8760 hours and 1000 scenarios since we use linear programming and propose a benders based method adapted to deal with cvar constraints in the master problem through several analyses including the chilean main electricity system we demonstrate the effects of renewables on hedging both fossil fuel and hydrological risks effects of security of supply on costs risks and renewable investment and the importance of demand side services in limiting risk exposure of generation portfolios through encouraging risk mitigating renewable generation investment

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

coping with the tragedy of the commons game structure and design of rules the paper provides an assessment of some recent results of the large amount of new institutional economics analyses investigating a common pool resource setting with a specific focus on game theory models most of the studies have used a non cooperative approach in order to explain how under provision for the resource or its over use the so called tragedy of the commons can be avoided within given management rules they show how the characteristics of the game payoff matrix repetition or of the users group size wealth heterogeneity and moral norms may give incentives for the latter to play in a way that benefits all users by contrast much fewer articles have used a formalized approach to assess the possibility for players to design new rules to overcome the initial tragedy of the commons the article ends with some proposals of directions for future research

a real options evaluation model for the diffusion prospects of new renewable power generation technologies this study presents a policy planning model that integrates learning curve information on renewable power generation technologies into a dynamic programming formulation featuring real options analysis the model recursively evaluates a set of investment alternatives on a year by year basis thereby taking into account that the flexibility to delay an irreversible investment expenditure can profoundly affect the diffusion prospects of renewable power generation technologies price uncertainty is introduced through stochastic processes for the average wholesale price of electricity and for input fuel prices demand for electricity is assumed to be increasingly price sensitive as the electricity market deregulation proceeds reflecting new options of consumers to react to electricity price changes such as time of use pricing unbundled electricity services and choice of supplier the empirical analysis is based on data for the turkish electricity supply industry apart from general implications for policy making it provides some interesting insights about the impact of uncertainty and technical change on the diffusion of various emerging renewable energy technologies

assessing the value of wind generation in future carbon constrained electricity industries this paper employs a novel monte carlo based generation portfolio assessment tool to explore the implications of increasing wind penetration and carbon prices within future electricity generation portfolios under considerable uncertainty this tool combines optimal generation mix techniques with monte carlo simulation and portfolio analysis methods to determine expected overall generation costs associated cost uncertainty and expected co2 emissions for different possible generation portfolios a case study of an electricity industry with coal combined cycle gas turbines ccgt open cycle gas turbines ocgt and wind generation options that faces uncertain future fossil fuel prices carbon pricing electricity demand and plant construction costs is presented to illustrate some of the key issues associated with growing wind penetrations the case study uses half hourly demand and wind generation data from south eastern australia and regional estimates of new build plant costs and characteristics results suggest that although wind generation generally increases overall industry costs it reduces associated cost uncertainties and co2 emissions however there are some cases in which wind generation can reduce the overall costs of generation portfolios the extent to which wind penetration affects industry expected costs and uncertainties depends on the level of carbon price and the conventional technology mix in the portfolios

optimisation of electricity energy markets and assessment of co2 trading on their structure a stochastic analysis of the greek power sector power production was traditionally dominated by monopolies after a long period of research and organisational advances in international level electricity markets have been deregulated allowing customers to choose their provider and new producers to compete the former public power companies vast changes have been made in the european legal framework but still the experience gathered is not sufficient to derive safe conclusions regarding the efficiency and reliability of deregulation furthermore emissions trading progressively becomes a reality in many respects compliance with kyoto protocol s targets is a necessity and stability of the national grid s operation is a constraint of vital importance consequently the production of electricity should not rely solely in conventional energy sources neither in renewable ones but on a mixed structure finding this optimal mix is the primary objective of the study a computational tool has been created that simulates and optimises the future electricity generation structure based on existing as well as on emerging technologies the results focus on the greek power sector and indicate a gradual decreasing of anticipated co2 emissions while the socioeconomic constraints and reliability requirements of the system are met policy interventions are pointed out based on the numerical results of the model c 2010 elsevier ltd all rights reserved

law finance and firm growth we investigate how differences in legal and financial systems affect firms use of external financing to fund growth we show that in countries whose legal systems score high on an efficiency index a greater proportion of firms use long term external financing an active though not necessarily large stock market and a large banking sector are also associated with externally financed firm growth the increased reliance on external financing occurs in part because established firms in countries with well functioning institutions have lower profit rates government subsidies to industry do not increase the proportion of firms relying on external financing the corporate finance literature suggests that market imperfections caused by conflicts of interest and informational asymmetries between corporate insiders and investors constrain firms in their ability to fund investment projects the magnitude of these imperfections depends in part on the effectiveness of the legal and financial systems because these systems differ across countries the literature implies that there should exist systematic cross country differences in firms ability to obtain external capital to finance investment in this paper we examine whether the underdevelopment of legal and financial systems does prevent firms in some countries from investing in potentially profitable growth opportunities in particular we focus on the use of long term debt or external equity to fund growth see our earlier work demirgut kunt and maksimovic 1996a which compares firms financial structures in developed and developing countries and finds the greatest difference to be in the provision of long term credit we estimate a financial planning model to obtain the maximum growth rate that each firm in our thirty country sample could attain without access to long term financing we then compare these predicted growth rates to growth rates realized by firms in countries with differing degrees of development in their legal and financial systems our approach enables us to identify specific characteristics of the legal and financial systems that are associated with long term financing of firm growth thus we provide a micro level test of the hypoth

who invests in renewable electricity production empirical evidence and suggestions for further research transforming energy systems to fulfill the needs of a low carbon economy requires large investments in renewable electricity production res e recent literature underlines the need to take a closer look at the composition of the res e investor group in order to understand the motives and investment processes of different types of investors however existing energy policies generally consider res e investments made on a regional or national level and target investors who evaluate their res e investments according to least cost high profit criteria we present empirical evidence to show that res e investments are made by a heterogeneous group of investors that a variety of investors exist and that their formation varies among the different types of renewable sources this has direct implications for our understanding of the investment process in res e and for the study of motives and driving forces of res e investors we introduce a multi dimensional framework for analyzing differences between categories of investors which not only considers to the standard economic dimension which is predominant in the contemporary energy literature but also considers the entrepreneurship innovation adoption and institutional dimensions the framework emphasizes the influence of four main investor related factors on the investment process which should be studied in future research motives background resources and personal characteristics

addressing global environmental externalities transaction costs considerations is there a way to understand why some global environmental externalities are addressed effectively whereas others are not the transaction costs of defining the property rights to mitigation benefits and costs is a useful framework for such analysis this approach views international cooperation as a contractual process among country leaders to assign those property rights leaders cooperate when it serves domestic interests to do so the demand for property rights comes from those who value and stand to gain from multilateral action property rights are supplied by international agreements that specify resource access and use assign costs and benefits including outlining the size and duration of compensating transfer payments and determining who will pay and who will receive them four factors raise the transaction costs of assigning property rights i scientific uncertainty regarding mitigation benefits and costs ii varying preferences and perceptions across heterogeneous populations iii asymmetric information and iv the extent of compliance and new entry these factors are used to examine the role of transaction costs in the establishment and allocation of property rights to provide globally valued national parks implement the convention on the international trade in endangered species of wild fauna and flora execute the montreal protocol to manage emissions that damage the stratospheric ozone layer set limits on harvest of highly migratory ocean fish stocks and control greenhouse gas emissions jel d23 p14 q22 q51 q54 q58

economic development as self discovery in the presence of uncertainty about what a country can be good at producing there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated we develop a general equilibrium framework for a small open economy to clarify the analytical and normative issues we highlight two failures of the laissez faire outcome there is too little investment and entrepreneurship ex ante and too much production diversification ex post optimal policy consists of counteracting these distortions to encourage investments in the modern sector ex ante but to rationalize production ex post we provide some informal evidence on the building blocks of our model

evaluating the dynamic performance of energy portfolios empirical evidence from the dea directional distance function abstract in recent years the complex global energy commodity market has led to increased uncertainty for energy investment returns and tremendous challenges for investors to design appropriate energy portfolios therefore we employ four popular portfolio methods to determine energy portfolios based on daily fossil fuel futures prices during 2006 2015 moreover we use the dea window analysis method and dea directional distance function to comprehensively evaluate the dynamic performance of these energy portfolios based on the efficiency perspective the empirical results indicate that first to increase investment returns the mean variance method that exclusively emphasizes the maximization of returns shows the best performance however in order to decrease the volatility and risk of investment returns the mean variance method that aims to resist risk more than make profits and the bootstrap historical simulation value at risk var method have the best performance second when the global financial crisis broke out in the second half of 2008 and energy markets experienced a sharp downturn in the second half of 2014 the dea efficiency of energy portfolios appeared relatively lower than those of their neighboring periods regardless of which portfolio method is employed finally the average dea efficiencies of energy portfolios are all higher than those of single energy investment throughout the sample period except when the equally weighted method and the information entropy comprehensive index method are used meanwhile the mean variance method that prefers profit making to risk resisting possesses the highest average dea efficiency among various methods concerned

wind power reliability valuation in a hydro dominated power market the colombian case abstract the design of market mechanisms that remunerates the reliability provided by a generator in a power market is a task that aims to ensure the normal operation of the system for the case of a hydro dominated system when wind power is introduced and operated under the merit order effect it is possible to assess the effect of the displacement of hydro generation due to wind generation over the system s reliability in terms of firm energy taking this into account a model that valuates the firm energy provided by wind power in a hydro dominated system is proposed this model considers the effect of wind power over the system s reservoirs and the market price of electricity and valuates the firm energy as the net savings of the system related to the increase in the firm energy of the system when wind power is introduced the results show that wind power under merit order effect increases the firm energy of the system and decreases the market price of electricity being the net savings in comparison to the corresponding hydro only system the reliability income that should be perceived by the wind power generator

the effect of environmental policies on risk reductions in energy generation abstract we demonstrate that environmental policies can decrease the risks in energy generation for private investors when several renewable technologies are simultaneously triggered this is because diverse renewable technologies can hedge the intermittent generation of other forms of renewable power our study is distinct from previous literature which has not examined environmental policies through a risk reduction analysis or has only considered a few technologies such as wind and solar when analyzing risk reduction benefits this paper is important as environmental policies can be justified not only due to environmental benefits but also economically from a risk reduction perspective by using basic diversification gains

does risk aversion affect transmission and generation planning a western north america case study abstract we investigate the effects of risk aversion on optimal transmission and generation expansion planning in a competitive and complete market to do so we formulate a stochastic model that minimizes a weighted average of expected transmission and generation costs and their conditional value at risk cvar we show that the solution of this optimization problem is equivalent to the solution of a perfectly competitive risk averse stackelberg equilibrium in which a risk averse transmission planner maximizes welfare after which risk averse generators maximize profits this model is then applied to a 240 bus representation of the western electricity coordinating council in which we examine the impact of risk aversion on levels and spatial patterns of generation and transmission investment although the impact of risk aversion remains small at an aggregate level state level impacts on generation and transmission investment can be significant which emphasizes the importance of explicit consideration of risk aversion in planning models

using renewables to hedge against future electricity industry uncertainties an australian case study abstract a generation portfolio modelling was employed to assess the expected costs cost risk and emissions of different generation portfolios in the australian national electricity market nem under highly uncertain gas prices carbon pricing policy and electricity demand outcomes were modelled for 396 possible generation portfolios each with 10 000 simulations of possible fuel and carbon prices and electricity demands in 2030 the lowest expected cost generation portfolio includes 60 renewable energy increasing the renewable proportion to 75 slightly increased expected cost by 0 2 mwh but significantly decreased the standard deviation of cost representing the cost risk increasing the renewable proportion from the present 15 to 75 by 2030 is found to decrease expected wholesale electricity costs by 17 mwh fossil fuel intensive portfolios have substantial cost risk associated with high uncertainty in future gas and carbon prices renewables can effectively mitigate cost risk associated with gas and carbon price uncertainty this is found to be robust to a wide range of carbon pricing assumptions this modelling suggests that policy mechanisms to promote an increase in renewable generation towards a level of 75 by 2030 would minimise costs to consumers and mitigate the risk of extreme electricity prices due to uncertain gas and carbon prices

a monte carlo based decision support tool for assessing generation portfolios in future carbon constrained electricity industries abstract this paper presents a novel decision support tool for assessing future generation portfolios in an increasingly uncertain electricity industry the tool combines optimal generation mix concepts with monte carlo simulation and portfolio analysis techniques to determine expected overall industry costs associated cost uncertainty and expected co 2 emissions for different generation portfolio mixes the tool can incorporate complex and correlated probability distributions for estimated future fossil fuel costs carbon prices plant investment costs and demand including price elasticity impacts the intent of this tool is to facilitate risk weighted generation investment and associated policy decision making given uncertainties facing the electricity industry applications of this tool are demonstrated through a case study of an electricity industry with coal ccgt and ocgt facing future uncertainties results highlight some significant generation investment challenges including the impacts of uncertain and correlated carbon and fossil fuel prices the role of future demand changes in response to electricity prices and the impact of construction cost uncertainties on capital intensive generation the tool can incorporate virtually any type of input probability distribution and support sophisticated risk assessments of different portfolios including downside economic risks it can also assess portfolios against multi criterion objectives such as greenhouse emissions as well as overall industry costs

energy planning and modern portfolio theory a review abstract modern portfolio theory mpt stands as a widely accepted methodology to meet the challenges associated with the definition of energy planning for a particular territory or region energy planning is thus framed as an investment selection problem mpt is characterized by having a wider capacity and conceptual richness than the other previously used methodologies such as the individual least cost alternative the portfolio approach is based on solving for an objective function that seeks to minimize either the cost or the risk of the portfolio subject to different constraints considering that real electricity generation assets can be defined in terms of cost or return and economic risk for each alternative technology the relevant portfolios are the result of solving the optimization model to determine the efficient cost risk frontier the work presented here consists of an exhaustive review of the literature in relation to the application of mpt methodology to the field of energy planning and electricity production a new classification is proposed from a financial perspective of the selection of investments from the preceding studies it delves deeper into the explanation of the limits to the methodology and into the concept of risk which is key from both a financial and an energy perspective the main methodological contributions found in the literature are examined that are aimed at improving the capacity of the model and adjusting it to the reality of the electricity market finally conclusions are provided from the works analyzed in terms of renewable technologies and the policy implications derived from them in most studies a preference has been shown for the inclusion of renewable technologies in the efficient portfolios however in order to implement the decision to increase the share of renewable technologies greater flexibility in the interconnection capacity between states and in storage capacity is needed

quantifying the risk of an increase in the prices of non energy products by combining the portfolio and input output approaches abstract an increase in the price of imported fossil fuels indirectly increases the producer price in non energy sectors however this indirect influence cannot be taken into account by the traditional portfolio approach this study proposes an analytical framework combining the input output i o model and the portfolio approach that can take the indirect influence into account a risk of an increase in the producer price in japanese non energy sectors during the period 1970 2000 is estimated and the causes of a decrease in the risk through the analysis period are clarified by decomposing an index of the risk the result indicates that almost all non energy sectors have decreased this risk during the analysis period the degree and cause of the decrease depends on a sector s location in the hierarchical structure of japanese industries for example assembly sectors have decreased their risk mainly as the result of improvement in energy usage by upstream sectors such as material sectors rather than their own improvements proper policies considering such a structure are required to decrease the risk further because the effort taken to do so is seldom motivated by economic profit

the power and limitations of proportional cutbacks in common pool resources abstract this paper examines the success and limitations of proportional cutbacks as an allocation rule for improving the performance of common pool resources cprs two field cases one success and one failure motivate the analysis for symmetric cprs we establish the existence of efficiency enhancing proportional cutbacks we then introduce complications that arise in the presence of asymmetries which induce a continuum of proportional cutbacks that raise efficiency above nash equilibrium calibrating a linear quadratic cpr model to global carbon dioxide emissions the efficiency and distributional consequences of proportional cutbacks like those embodied in the kyoto protocol are derived

the european low carbon mix for 2030 the role of renewable energy sources in an environmentally and socially efficient approach abstract the european union s commitment to increase the presence of renewable energy sources in its portfolio has resulted in better levels of security of supply competitiveness and environmental sustainability this proposed work reviews european legislation regarding the promotion of renewable energy sources as well as the bibliography that applies portfolio theory methodology to energy policy this double revision gives rise to the question whether the share limits of renewable energy technologies anticipated for the european power mix in 2020 and 2030 are actually efficient the optimization model corrects for the attractiveness of renewable energy sources as opposed to conventional sources in terms of costs risks and pollutant gas emissions this model successfully and explicitly identifies the positive effect on the environment that is represented by the inclusion of renewable energy sources in the portfolio the goal is to minimize the cost and risk that society must bear to produce electricity in addition to compliance with european pollutant gas co2 so2 nox and pm objectives the results for 2020 indicate that the eu would not be able to reach its emissions reduction goals with the anticipated shares of renewable energy sources in 2030 achieving a lower emissions portfolio would not mean taking on greater costs although it would be necessary to assume a greater level of risk the anticipated shares of renewable energy sources 5 and fossil fuel technologies 15 would be overdimensioned in the forecasts analyzed in terms of technologies both nuclear and wind energy stand out both with shares above 20 on the contrary biomass and solar photovoltaic energies would be unnecessary in order to reach efficiency in any case one thing is clear the eu would be the master of its energy future if it prioritizes the importance of renewable energy sources in its efficient portfolio

modeling technology adoption as an irreversible investment under uncertainty the case of the turkish electricity supply industry this paper studies energy conversion technology adoption in the electricity supply sector from the perspective of irreversible investments under uncertainty and with a particular interest in environmental sustainability we develop a dynamic technology adoption model that is firmly rooted in economic theory and that takes important determinants of optimal investment in available technologies e g life cycle capital and operation cost explicitly into account uncertainty is introduced for the demand for peak load capacity unit generation costs and for the average electricity price we test the model empirically by applying it to data for the turkish power supply industry the model guided optimal investment schedule based on net present value considerations exhibits significant deviations from the actual investment outcome we find that the increased adoption of natural gas fired power generation technologies in turkey in recent years while contributing to environmental sustainability has had doubtful merits from an investor s perspective