Research in Energy Economics Topics
Saturday, Jan. 4, 2020 12:30 PM - 2:15 PM (PDT)
- Chair: Alberto J. Lamadrid, Lehigh University
Second Best Pricing for Incomplete Market Segments: Applications to Electricity Pricing
AbstractDue to technological, political or practical considerations, simple rate structures prevail in many market segments. This reality contrasts with the fundamental theorems of welfare economics where prices are fully differentiated by time, location and contingency of delivery. This paper develops a tractable framework to design simple rate schedules under a large family of exogenous constraints. One can then easily assess the relative efficiency gains from using more complex price schedules and speculate about the absolute value of the benefits that may arise from R\&D or lobbying efforts to remove existing technological or political barriers. Conveniently, implementation relies on basic machine learning techniques and typically available information. Retail electricity pricing in both France and California are used as example applications.
Valuation of Drivers and Barriers to Smart Meter Adoption in the UK: A Survey Experiment
AbstractTo facilitate a sustainable energy transition, governments and innovators have encouraged the adoption of smart technologies in the home that allow for increased flexibility in centralized energy grids. The ambitious Smart Meter Implementation Programme in the United Kingdom has indisputably failed to achieve its objective of equipping all UK dwellings with smart meters by 2020, perhaps due to some or all of several identified barriers to adoption of allegedly welfare-enhancing energy technology in the home. By partnering with the UK's energy regulator, this research uses an incentive-compatible online experiment to elicit the willingness-to-accept of a representative panel of over 2,400 UK households for smart meter installation. Randomized information treatments allow for assessment of the impact on adoption and willingness-to-accept of several purported market failures in relation to smart meter adoption, namely information asymmetries regarding the personal and social benefits of smart meter adoption as well as information regarding accumulated positive `learning-by-using' externalities. We explore treatment effects for a range of potential subsidy values, and discuss implications for policymakers in encouraging residential smart meter adoption.
Market Power in Cost-Based Wholesale Electricity Markets: Evidence from Mexico
AbstractMarket power is an important concern for designers of restructured wholesale electricity markets. In a cost-based market, the price and quantity offers of generation plants are set based on a regulatory formula. This market design is used for most electricity markets in Latin America, in part because it appears to eliminate the potential for dominant firms to exercise market power. In this paper I study the performance of the cost-based model in the newly restructured Mexican electricity market. I show that large generation firms still have the ability to exercise market power. This behavior would be difficult for the market operator to detect, given the informational asymmetry between firms and regulators. Using data for 2018, I show that both the generation offer prices and the market price are higher in hours when firms have greater ability to exercise market power.
- Q4 - Energy
- L9 - Industry Studies: Transportation and Utilities