Water and Energy

Paper Session

Saturday, Jan. 7, 2017 12:30 PM – 2:15 PM

Hyatt Regency Chicago, Wrigley
Hosted By: Transportation and Public Utilities Group
  • Chair: Adrienne Ohler, Illinois State University

Proximity to a Water Supply Reservoir and Dams: Is There Heterogeneity in the Effects on Housing Prices?

Jeffrey P. Cohen
,
University of Connecticut
Joseph Danko
,
University of Connecticut
Ke Yang
,
University of Hartford

Abstract

An understanding of the potential positive and negative impacts of living near reservoirs and dams is important in justifying the operation of water (and possibly other) utilities near residential properties. While there is a body of literature on the effects of proximity to dams and reservoirs on housing prices, little known research attempts to determine if various individual houses are impacted differently depending on their locations and years of sale. We examine properties in Barkhamstead, Connecticut that sold between 2001 and 2015. The reservoir in Barkhamstead supplies much of central Connecticut with its drinking water. We utilize nonparametric regression techniques (Geographically Weighted Regressions) to allow for the possibility that the major reservoir and dams in Barkhamstead affect various house prices differently, depending on their locations and when they are sold. We find that for the most part, proximity to dams leads to lower housing sale prices, with the magnitudes of these effects varying across geographic space and over time. The signs of the effects of proximity to the reservoir vary – some properties benefit from proximity while others experience lower sale prices when they are closer to the reservoir. We also control for other key housing characteristics and environmental variables, such as elevation, numbers of bedrooms and baths, age of properties, year of sale, square footage and acreage, and others. We generate maps of the signs and magnitudes of the coefficients for several of the key variables to illustrate the heterogeneity.

Floods and Droughts: Eliciting Customer Willingness-to-Pay and Adverse Event Likelihood Priors for Public Utility Pricing and Infrastructure Decisions

Diane P. Dupont
,
Brock University
James Price
,
Brock University
Vic L. Adamowicz
,
University of Alberta
P. Lloyd Smith
,
University of Alberta

Abstract

This paper describes the development and implementation of a method to elicit
public preferences for improved water and wastewater management, specifically
examining the relative desirability of engineering versus green infrastructure
approaches to having more reliable water supplies and to mitigating the likelihood of
rainfall-caused flooding events. The case study uses data from Canada collected in
2016. Data collected include respondent estimates of the prior likelihood of events,
as well as data on self-protection measures. Using a choice modeling approach, the
paper estimates household willingness-to-pay values for avoiding both unreliable
water supplies and rain-based urban flooding. Choice attributes include reductions in
the likelihood of adverse events, as well as type of infrastructure used to obtain the
benefits, as well as increases in household water bills. Novel components include the
use of respondent-specific status quo levels of likelihood priors, as well as data
collected about beliefs that public officials will take their preferences into account and
the certainty the respondent expresses about his/her choice. Results indicate a great
deal of heterogeneity about prior beliefs on the likelihood of adverse events and that
green infrastructure elicits a higher willingness-to-pay.

Emissions Allocation Design to Avoid Leakage Under the Clean Power Plan

Dallas Burtraw
,
Resources for the Future
Anthony Paul
,
Resources for the Future
Karen Palmer
,
Resources for the Future
Hang Yin
,
Resources for the Future

Abstract

This paper uses simulation modeling to illustrate the environmental and electricity market effects of various approaches to using updating output-based allocation of emissions allowances to overcome leakage of generation and emissions to new sources under a mass based approach to implementation of the Clean Power Plan that focuses on existing generators only. In many emissions cap and trade programs, emissions allowances are allocated based on past behavior (grandfathering) and that approach provides no incentives for specific behavior going forward. In contrast, updating allocation distributes the emissions asset value based on current or recent behavior and updates that allocation over time thereby providing an incentive to do more of that behavior. If the behavior is electricity generation (output), then eligible entities receive a share of the allocation based on their share of electricity generation. Because this allocation is updated over time, entities have an incentive to grow their generation in order to secure a larger portion of the allowance pool. Allowances may be allocated using multiple approaches applied to portions of the total allowance pool as envisioned in the proposed federal plan and model rule. Important aspects of the allocation decision are the determination of which entities are eligible to receive this production incentive, how many allowances will be distributed this way and if allocation rates (allowances per MWh) will be common for all eligible entities or differentiated by technology.

Abnormal Returns in Markets for Congestion Revenue Rights

Rimvydas Baltaduonis
,
Gettysburg College
Sam Bonar
,
Federal Energy Regulatory Commission
John Carnes
,
Federal Energy Regulatory Commission
Erin Mastrangelo
,
Federal Energy Regulatory Commission

Abstract

In organized energy markets that use locational pricing, power generators and energy suppliers use Financial Transmission Rights (FTRs) to hedge against grid congestion charges, while third party speculators attempt to capture a return with these contracts. FTRs are defined between two locations on the power transmission grid, known as a path. These financial instruments accrue their value based on the energy price differential at two ends of a path. Having the only organized energy market in the Western Interconnection, California has also implemented a version of FTRs, officially known as Congestion Revenue Rights (CRRs). This paper investigates the performance of the CRR markets by estimating and analyzing the presence of abnormal returns among these financial instruments. Our analysis identifies the paths with abnormal CRR returns with the majority of them being positive.
Discussant(s)
Diane P. Dupont
,
Brock University
Jeffrey P. Cohen
,
University of Connecticut
Tatyana Deryugina
,
University of Illinois-Urbana-Champaign
Joseph A. Cullen
,
Washington University-St. Louis
JEL Classifications
  • Q2 - Renewable Resources and Conservation
  • Q5 - Environmental Economics