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While the International Association for Energy Economics (IAEE) makes every effort to ensure the veracity of the material and the accuracy of the data therein, IAEE is not responsible for the citing of this content until the article is actually printed in a final version of Economics of Energy & Environmental Policy. For example, preprinted articles are often moved from issue to issue affecting page numbers, and actual volume and issue numbers. Care should be given when citing Economics of Energy & Environmental Policy preprint articles.

Economics of Energy & Environmental Policy
Volume 10, Number 2

Electric Vehicles Rollout—Two Case Studies

Fridrik M. Baldursson, Nils-Henrik M. von der Fehr, and Ewa Lazarczyk

DOI: 10.5547/2160-5890.10.2.fbal
View Abstract

We present and discuss evidence on electric-vehicle rollout in The Netherlands and Norway, two forerunners in this area. We demonstrate that the uptake of electric vehicles is essentially driven by financial and other benefits offered to their owners, and that a partial electrification of the vehicle fleet may be achieved even with limited public charging infrastructure; indeed, infrastructure has tended to follow the development of electric vehicles. The impact on the electricity industry in general and electricity networks in particular has so far been limited, even given the relatively high penetration of electric vehicles.

Empower the Consumer! Energy-related Financial Literacy and its Implications for Economic Decision Making

Julia Blasch, Nina Boogen, Claudio Daminato, and Massimo Filippini

DOI: 10.5547/2160-5890.10.2.jbla
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Untapped energy savings potential in the residential sector might lead to substantial welfare losses. While several studies have focused on the role of behavioral biases in explaining the lack of adoption of energy-efficient durable goods, little is known about the role of limited energy-specific knowledge and financial literacy. In this paper, we propose an integrated concept of ‘energy-related financial literacy’, which combines both energy cost-specific knowledge and skills needed to process this information. Using data from a large household survey in three European countries, we explore the determinants of different measures of literacy and, most importantly, we provide empirical evidence on the association between limited knowledge and skills to perform an intertemporal optimization and the adoption of energy-efficient light bulbs. Our findings support the promotion of energy-specific financial education programs and tools to increase the adoption of energy-efficient durable goods.

Incentive Regulation of Electricity and Gas Networks in the UK: From RIIO-1 to RIIO-2

Tooraj Jamasb

DOI: 10.5547/2160-5890.10.2.tjam
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The regulatory and operating context of energy networks is dynamic and constantly evolving. Achieving a multitude of economic, environmental, social and policy objectives is a challenging task for the sector regulators. In 2010, the UK energy regulator Ofgem replaced its approach to energy network price control and incentive regulation with a Revenue-Incentive-Innovation-Output (RIIO-1) model. This paper reviews the incentive areas that influence the performance of the next version of the model (RIIO-2). Guided by the principles of regulatory economics and evidence in the literature, we discuss key aspects and incentive properties of the regulation model under revision by the regulator. The lessons of experience from the RIIO models are also relevant for regulators in other countries and can inform their design of incentive regulation of energy networks.

The Cost of Finance and the Cost of Carbon: A Case Study of Britain’s only PWR

David Newbery

DOI: 10.5547/2160-5890.10.2.dnew
View Abstract

This paper argues that the cost of decarbonising depends critically on the Weighted Average Cost of Capital (WACC), illustrated with a case study of Sizewell B (SZB, the nuclear station commissioned in 1995). It calculates the cost per tonne of CO2 abated with prices set as for transmission assets by the regulator under the Regulatory Asset Base model. The cost depends critically on the WACC set in comparable utility price controls. At a low WACC the cost is £201936.2/tonne CO2 abated and £201943.3/t. CO2 at the high WACC, compared with the roughly £40/t. CO2 paid by GB generators in 2019. Moving from the social discount rate of 2.5% to a hurdle rate of 8% increases the cost from £15–20/t. to over £60/t. Had Britain continued building replicas of SZB the cost saving compared to the current programme might be £20199–19 billion.

Biomethane for Electricity in Mexico: A Prospective Economic Analysis

Héctor M. Núñez

DOI: 10.5547/2160-5890.10.2.hnun
View Abstract

Mexico has important clean energy goals for the next ten years. While the previous administration promoted a competitive electricity market and ambitious environmental goals, the current administration has targeted higher revenues from the national power company. Second- generation biomethane, however, can meet both of these objectives because it substitutes imported natural gas, so it does not compete with the domestic electricity supply, and it helps to meet environ- mental goals. This paper develops an economic framework to provide insight into the economic and environmental effects of policy alternatives promoting the biomethane industry. Results show that maintaining the status quo policy will prioritize electricity company revenues and biomethane production will not occur, while a first-best policy will promote this industry more and yield the highest social welfare.


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