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Economics of Energy & Environmental Policy
Volume 2, Number 1

Baltic Gas Supply Security: Divided We Stand?

Pierre Noel, Sachi Findlater, and Chi Kong Chyong

DOI: http://dx.doi.org/10.5547/2160-5890.2.1.1
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Estonia, Latvia and Lithuania, depending entirely on Russia for their gas supply, want to invest in gas supply security. The European Commission encourages them to do so by conditioning subsidies to the building of joint regional infrastructure. In the face of serious political and legal hurdles to Baltic gas security co-operation, Brussels' approach might be misguided if it prevents the implementation of workable national policy alternatives. Our calculations show that the Baltic States could insure their gas-fired district heating systems for small security premiums. Each country could insure its entire peak gas consumption against even long-lived disruptions for a premium of about 10% by building a national LNG terminal. A joint Baltic LNG terminal is indeed cheaper in most cases, but only marginally so. We conclude that the Baltic States should go ahead with national solutions. Keywords: Natural gas, Energy security, Public policy, Baltic States, European Union

Energy-efficiency and Environmental Policies & Income Supplements in the UK: Evolution and Distributional Impacts on Domestic Energy Bills

Mallika Chawla and Michael G. Pollitt

DOI: http://dx.doi.org/10.5547/2160-5890.2.1.2
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The paper examines the financial costs of energy-efficiency and environmental policies that directly affect domestic electricity and gas bills in the UK over time. It also attempts to work out the current distributional impacts of these policies and others that act as income supplements thereby presenting a consistent picture across time and income deciles. Figures suggest that between 2000 and 2011, the percentage share of policy costs in typical domestic electricity and gas bills rose by 14% and 4% respectively. This reflects a growing share of policy costs in bills which is relatively small for gas customers but significant for electricity customers. Moreover, distributional impacts of the energy-policy mix highlight the issue of imperfect targeting of low-income households during 2009-10. The study also indicates that during 2010-11, 76% of the funds for energy-efficiency schemes were handled by the private sector. Given that a long-term solution to fuel poverty lies in improving thermal efficiency of houses, this research draws attention towards the need for definitive evidence on the ways in which energy suppliers charge policy costs from their domestic customers. Keywords: Energy-efficiency and environmental policy, Income supplements, Distributional impact, Policy costs

Distributional Effects of Energy Transition: Impacts of Renewable Electricity Support in Germany

Karsten Neuhoff, Stefan Bach, Jochen Diekmann, Martin Beznoska and Tarik El-Laboudy

DOI: http://dx.doi.org/10.5547/2160-5890.2.1.3
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The discussion of the support for renewable energy must consider the distributional impact of cost allocation. The public is sensitive to social imbalances caused by rising power prices that might jeopardize the acceptance of energy transformation. By the end of 2012 about 19 percent of German power is produced with renewables other than hydropower. As a result, German consumers will pay for global learning investment through their electricity bill. We explore the distributional implications for households using household micro data. In 2013 households will allocate 2.5% of consumption expenditure to electricity. The increase to previous years was much debated in fall of 2012, but is not without precedent. In the mid-1980s the share was 2.3%. The effect is more significant for poor households, which allocate 4.5% of expenditure for power. We propose three options how to address this distributional impact: adjusted transfers, reduced electricity taxes, and, most effectively, support to improve energy efficiency. Keywords: Distributional effects, Power prices, Renewable energy, Compensation mechanisms

Market Power and Generation from Renewables: the Case of Wind in the South Australian Electricity Market

Bruce Mountain

DOI: http://dx.doi.org/10.5547/2160-5890.2.1.4
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This paper examines whether outcomes in the electricity market in South Australia are consistent with theoretical analysis and market modelling that concluded that intermittent generation benefits less from market power than conventional generation. The paper finds that, based on actual outcomes in South Australia over the period from 2006 to 2011, the exercise of market power is likely to result in a preference for investment in conventional fossil fuel based electricity generation, relative to investment in wind farms. It also concludes that while wind farms have taken market share from conventional generators, wind farms are not likely to have reduced spot prices in South Australia to the extent that seems apparent in electricity markets in other countries where wind farms are as prevalent but market power is less significant. The implication of these conclusions is that higher subsidies will be needed to ensure that the Australian Government's renewable electricity targets will be met, than would be the case if the exercise of market power did not have these distributional effects. The paper suggests consideration of changes to market design and competition law to remedy this. Keywords: Wind farms, Market power, Electricity market design

The Impact of Efficient Carbon and Gas Pricing on the Russian Electricity Market

Nadia Chernenko

DOI: http://dx.doi.org/10.5547/2160-5890.2.1.5
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The paper examines the possible interactions of various policy proposals to introduce carbon taxation, adjust the domestic price of gas to export parity and build a major electricity interconnector, and their impact on carbon emissions and the fuel mix of the Russian electricity supply industry. Without raising gas prices, a carbon tax of �25/tonne CO2 reduces emissions by 13% and the output of coal-fired plant by nearly 50%, with the major impact at �6.3-12.5/tonne. Moving gas prices to export parity substantially offsets this effect, and requires higher carbon taxes to reduce emissions by the same amount, as does building the prospective interconnector "Ural-Siberia". Keywords: Carbon tax, Russian electricity industry, Gas tariffs, Export parity

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