Congestion management in power systems

In liberalized power systems, generation and transmission services are unbundled, but remain tightly interlinked. Congestion management in the transmission network is of crucial importance for the efficiency of these inter-linkages. Different regulatory designs have been suggested, analyzed and followed, such as uniform zonal pricing with redispatch or nodal pricing. However, the literature has either focused on the short-term efficiency of congestion management or specific issues of timing investments. In contrast, this paper presents a generalized and flexible economic modeling framework based on a decomposed inter-temporal equilibrium model including generation, transmission, as well as their inter-linkages. The model covers short-run operation and long-run investments and hence, allows to analyze short and long-term efficiency of different congestion management designs that vary with respect to the definition of market areas, the regulation and organization of TSOs, the way of managing congestion besides grid expansion, and the type of cross-border capacity allocation. We are able to identify and isolate implicit frictions and sources of inefficiencies in the different regulatory designs, and to provide a comparative analysis including a benchmark against a first-best welfare-optimal result. To demonstrate the applicability of our framework, we calibrate and numerically solve our model for a detailed representation of the Central Western European (CWE) region, consisting of 70 nodes and 174 power lines. Analyzing six different congestion management designs until 2030, we show that compared to the first-best benchmark, i.e., nodal pricing, inefficiencies of up to 4.6% arise. Inefficiencies are mainly driven by the approach of determining cross-border capacities as well as the coordination of transmission system operators’ activities.     

Regulation of non-marketed outputs and substitutable inputs

We study the regulation of a monopolistic firm that provides a non-marketed output based on multiple substitutable inputs. The regulator is able to observe the effectiveness of the provision, but faces information asymmetries with respect to the efficiency of the firm’s activities. Specifically, we consider a setting where one input and the output are observable, while another input and related costs are not. Multi-dimensional information asymmetries are introduced by discrete distributions for the functional form of the marginal rate of substitution between the inputs as well as for the input costs. For this novel setting, we investigate the theoretically optimal Bayesian regulation mechanism. We find that the first-best solution cannot be obtained in case of shadow costs of public funding. The second-best solution implies separation of the most efficient type with first-best input levels, and upwards distorted (potentially bunched) observable input levels for all other types. Moreover, we compare these results to a simpler non-Bayesian approach, i.e., a single pooling contract, and hence, bridge the gap between the academic discussion and regulatory practice. In a numerical simulation, we identify certain conditions in which a single contract non-Bayesian regulation can indeed get close to the second-best solution of the Bayesian menu of contracts regulation.     

Eigenerzeugung und Selbstverbrauch von Strom – Stand,Potentiale und Trends

Due to falling costs of self-production, increasing end-user electricity prices as well as indirect state incentives, self-production and consumption of electricity have become more and more attractive for end-users across all economic sectors. Thus, opportunities to evade taxes, surcharges and grid charges have arisen under the current legal framework. The situation is complicated by unclear requirements for the utilisation of state incentives as well as the vague statistical coverage of self-consumption. Historically, the total amount of self-consumption rose by 26?% between 2008 and 2012 to 56.7 TWh. The estimation of economic potentials and trends shows that development could accelerate substantially to a point where a considerable amount of the consumption in all sectors could be covered by self-production. This development will be significantly determined by the future legal framework regarding taxation and surcharges for self-consumption. Besides the level of taxes and surcharges, the minimum limit for charging small generation units will be a key control variable. From an economical point of view, derogations lead to distorted competition between various technologies that causes inefficient production structures and distributional effects. Moreover, they create a self-reinforcing effect: The higher the self-consumption is, the lower the assessment base for apportionments and charges becomes, and the higher the cost burden for the remaining end-users will be. As a result, the incentives for self-consumption are enhanced and, once again, the increased self-consumption causes further economic inefficiencies.     

Stepwise Investment in Circular Plastics Under the Presence of Policy Uncertainty

Environmental and Resource Economics - The use of recycled plastics is critical in the transition to a circular economy. However, for certain types of plastics, the recycling process is...