EnergyEcoLab’s Publications on Renewable Energies
We are excited to announce three new accepted papers from our team’s work on renewable energies. These are forthcoming at The Economic Journal, the American Economic Journal: Economic Policy, and the Journal of the Association of Environmental and Resource Economists. These papers deal with a variety of issues regarding the expansion of renewable energies and accompanying support policies. First, the functioning of future wholesale electricity markets in cases where they are dominated by renewable energies. Second, the quantification of the effects of renewable energy subsidies regarding pricing incentives and market power. Third, the effect of uniform subsidies on the allocation of solar photovoltaic plants. These policies are widely used to support the deployment of renewable energies and thus our research directly contributes to the debate on optimal policy design.
In “Auctions with Privately Known Capacities”, forthcoming at The Economic Journal, Natalia Fabra and Gerard Llobet assess in a theoretical model bidding equilibria and market outcomes in renewables-dominated electricity markets. A key feature of the model is that the availability of renewable energy capacity is random and it is private information. The results show that private information on capacities changes the nature of the equilibrium as compared to the case when private information is on costs (or valuations), a typical assumption in the standard electricity market models. Additionally, the authors show that the uniform-price and discriminatory auctions are not revenue equivalent, in contrast to when costs are independently drawn.
Paper available here.
In “Market Power and Price Exposure: Learning from Changes in Renewables Regulation”, forthcoming at the American Economic Journal: Economic Policy, Natalia Fabra and Imelda, study how RE technologies affect firms’ pricing incentives in wholesale electricity markets. In particular, the authors analyze whether renewable energies depress electricity market prices, and how this effect depends on their degree of exposure to fluctuations in market prices. The paper develops a theoretical model to show that fixed market prices, such as feed-in tariffs, are relatively more effective at curbing market power of dominant firms that own large shares of renewable capacity. The authors test for the main theoretical predictions empirically using detailed data from the Spanish electricity market and confirm that a switch from full price exposure to fixed prices caused a 2-4% reduction in the average price-cost markup.
Paper available here.
In “(Mis)allocation of Renewable Energy Sources”, forthcoming at the Journal of the Association of Environmental and Resource Economists, Stefan Lamp and Mario Samano study feed-in tariffs as a form of uniform policy instrument in case of solar photovoltaic installations in Germany. The authors estimate the dispersion of marginal benefits from solar production and compute the social and private benefits from optimal reallocations of solar installations keeping total capacity fixed. They find that a reallocation of solar, in line with the marginal benefits, would lead to substantial gains compared to the status quo, especially if transmission capacity between regions was considered. Overall, the paper puts in perspective the social costs of nationwide policies that do not offer heterogeneous incentives.
Paper available here.
