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Economics of Energy & Environmental Policy
Volume 10, Number 1


The Role of Energy Poverty on Economic Growth in Sub-Saharan African Countries

Kerschyl Singh and Roula Inglesi-Lotz

DOI: 10.5547/2160-5890.9.2.ksin
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Appreciating firstly the importance of access to basic services and secondly, the lack of infrastructure particularly in the energy domain in the African continent, the aim of this paper is to examine empirically the role of energy poverty to economic growth in the sub-Saharan region. The findings aim to assist in proposing directions to policy makers for the implications of lack of access to energy as well as to relevant organisations to aid with deployment of sound policies and efforts towards well-functioning energy options. The empirical analysis is based on fixed effects panel data estimation as well as a Generalized Method of Moments (GMM) estimation including of fourteen sub-Saharan African countries (Benin, Botswana, Cameroon, Congo - Republic, Kenya, Mauritius, Mozambique, Namibia, Nigeria, Senegal, South Africa, Swaziland (Eswatini), Tanzania and Togo) for the period from 1990 to 2016. The empirical investigation found that access to electricity is a positive contributor to this group of countries' economic growth, with relatively low impact on a direct basis. This study provides evidence for the direct effect and also, raises the issue of all the health, education, income generating impact that access to electricity will provide to future generations.

Ownership Unbundling of Electricity Distribution Networks

Paul Nillesen and Michael Pollitt

DOI: 10.5547/2160-5890.10.1.pnil
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Traditional restructuring of power markets has focused on legally separating monopolistic transmission and distribution infrastructure with sufficient regulatory oversight to ensure non-discriminatory access to networks, and transparent and cost-reflective tariffs. There is consensus that ownership separation for transmission assets is beneficial for competition and transparency. However, at the distribution level the benefits of going beyond legal unbundling are questionable. This paper reviews the theoretical arguments for ownership unbundling and summarises the findings from 23 academic papers and consulting reports. In addition, this paper empirically demonstrates that forced distribution ownership unbundling in New Zealand (from 1998) and the Netherlands (from 2009) did not increase retail competition and did not increase network quality. It resulted in significant one-off and structural costs. The combination of increasingly active distribution networks with bi-directional power flows from distributed renewables, in combination with the digitalisation of energy supply and creation of distribution data platforms, suggests that interaction between networks and customers, traditionally separated from a regulatory and competition perspective may become more interlinked in future. Policymakers should therefore assess a broader set of policy measures, taking into account this changing network landscape, when focusing on increasing retail competition and network quality.

Clean Cooking: Why is Adoption Slow Despite Large Health and Environmental Benefits?

Govinda R. Timilsina and Sunil Malla

DOI: 10.5547/2160-5890.9.1.gtim
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More than one-third of the world's population, mainly the low-income group, still rely on traditional biomass fuels for household cooking. The indoor air pollution from household cooking is one of the main drivers of child mortality in developing countries. It also causes deforestation and emissions of black carbon. A large number of studies show that the benefits of clean cooking, including health and environmental benefits and value of time savings from fuelwood collection, are much higher than the cost of adoption of clean cooking. Over the last four decades, several programs and initiatives have been launched by governments and non-governmental organizations in many developing countries with the help of multilateral and bilateral donor agencies to adopt clean cooking. Two common options adopted are improved-cookstoves and cleaner fuels. However, the adoption of clean cooking has been very slow. This paper discusses the main factors responsible for the slow adoption of clean cooking. We present an extensive review of empirical literature for this purpose. We find that lack of information or awareness, low household income or affordability, and human behavior and social factors are the main barriers to expedite the adoption of clean cooking in developing countries. Finally, we offer some innovative approaches to promote clean cooking policies and programs.

Electricity Markets in the Resource-Rich Countries of the MENA: Adapting for the Transition Era

Rahmatallah Poudineh, Anupama Sen, and Bassam Fattouh

DOI: 10.5547/2160-5890.10.1.rpou
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The Middle East and North Africa�s (MENA) resource-rich economies are pursuing two parallel strategies in their electricity sectors: (i) increasing and integrating renewables into their power generation mix to mitigate the impact of rising domestic oil and gas demand on their economies and boost hydrocarbon export capacities; and (ii) undertaking power sector reforms to attract investment in generation capacity and networks, remove subsidies, and improve operational efficiency. These goals imply that the design of reforms (including regulations governing wholesale and retail markets and networks) needs to be carried out with a view to a rising share of non-dispatchable resources. The lack of an integrated approach to simultaneously address these two strategies is likely to lead to several misalignments between renewables and various components of future electricity markets, as the share of intermittent resources increases in the generation mix. The key challenge is that the �ultimate model� capable of reconciling these two goals is as yet unknown, and is still evolving, due to uncertainties around the development of technologies, institutions, and consumer preferences. We argue that resource-rich MENA countries can, however, move towards adopting a transition model of electricity markets, the individual elements of which can be adapted to suit either centralized or decentralized future electricity sector outcomes. We outline the key components of this model for the wholesale market, retail market, and network regulation, considering governments� objectives and the specific contexts of the countries in the region.

Fossil Fuel Subsidies, the Green Paradox and the Fiscal Paradox

Maria Elisa Belfiori

DOI: 10.5547/2160-5890.10.1.mbel
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Fossil fuel subsidies amounted to about 0.4% of global GDP in 2015, and there is an active call worldwide for eliminating them. The main argument in favor of removing subsidies is that it will lead to a reduction in global carbon emissions and a decrease in fiscal deficits. This paper shows that there are also some overlooked adverse effects of eliminating the current fossil fuel subsidies. A version of the "Green Paradox" arises when oil firms learn that fossil fuel subsidies will be removed. In fear that their assets will lose value, firms have incentives to accelerate extraction before subsidies are eliminated. Thus, carbon emissions increase in the short run and the climate externality worsens. Likewise, a "Fiscal paradox" arises because government outlays rise in the short run when more extraction occurs. I show that these intertemporal effects reduce the relative benefits from eliminating the existing subsidies and may actually make a fossil fuel subsidy reform counterproductive.

Different Cost Perspectives for Renewable Energy Support: Assessment of Technology-neutral and Discriminatory Auctions

Jan Kreiss, Karl-Martin Ehrhart, Marie-Christin Haufe, and Emilie Rosenlund Soysal

DOI: 10.5547/2160-5890.10.1.jkre
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Auctions are the prevalent instrument for promoting renewable energy sources worldwide, especially in the European Union and in Latin America. Auctions enable the controlled deployment of renewable energy sources while reducing costs. However, there are different views on relevant costs, auction targets, and their implications on the auction design. Here, the application of technology-neutral auctions is an essential topic of discussion. We show that technology-neutral auctions are not a panacea. We analyze two types of discriminatory design elements that improve the expected auction outcome with respect to specific auction targets. By applying theoretical concepts to auctions for renewable energy support, we highlight how discriminatory auctions can prevent windfall profits and how to include an overall economic perspective in the auction design. We illustrate our results with real-world examples.

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