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Are Regional Oil Markets Growing Closer Together?: An Arbitrage Cost Approach

Andrew N. Kleit

Year: 2001
Volume: Volume22
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol22-No2-1
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Abstract:
A large number of papers published in the last decade have attempted to show that energy markets have grown more integrated. These articles attempt to infer that various markets have become more "unified" because the correlation (in various forms) of prices between markets has increased during the last several years. This article suggests that a more appropriate modeling technique based on the theory of arbitrage as presented in Spiller and Wood (1988a and b), is better suited to answering this question. In this paper, the arbitrage technique is extended and applied to light crude oil markets in the 1990s. Arbitrage costs between markets are estimated. In addition, the hypothesis that crude oil markets have converged during this period is tested. Substantial though mixed support is gained for this hypothesis.



Money for Nothing? Why FERC Order 745 Should have Died

Xu Chen and Andrew N. Kleit

Year: 2016
Volume: Volume 37
Number: Number 2
DOI: 10.5547/01956574.37.2.xche
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Abstract:
Customer baseline load (CBL) measurement is designed to represent participants' expected usage in a number of electricity demand response (DR) programs. Our empirical results, however, show that CBLs can be systematically higher than DR participants' estimated load, especially for those experienced in DR activities, likely due to manipulation behaviors. Thus, the integrity of CBL may degrade over time. With an inflated CBL, the impact of DR programs may therefore be highly exaggerated, and consumers can be paid money when they are not actually reducing their demand. In particular, we design a manipulation-indicating variable "seemingly unattractive free-money opportunity" (SUFO) and discover system-wide manipulative behaviors that increase with time and are widely adopted by experienced DR participants. We suggest that policy makers in FERC, RTOs, and states regulatory agencies consider the threat of manipulation when modifying DR market rules following the Supreme Court's recent upholding of FERC Order 745.



Deregulation and Investment in Generation Capacity: Evidence from Nuclear Power Uprates in the United States

Zhen Lei, Chen-Hao Tsai, and Andrew N. Kleit

Year: 2017
Volume: Volume 38
Number: Number 3
DOI: 10.5547/01956574.38.3.zlei
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Abstract:
Nuclear power uprates are investments in generation capacity that enable reactors to operate beyond their original power limit. We find that owners of deregulated reactors are more likely to make investment in power uprates. Moreover, after deregulation owners of boiling water reactors are more likely to choose Extended Power Uprates (EPUs) that could add up to 20 percent of the original power, but owners of pressurized water reactors, another type of reactors for which EPUs are more technically challenging, tend to select other types of uprates that add less of reactor power. Deregulation incentivizes reactor owners to pursue profitable investments and propels them to make careful investment decisions more consistent with the technological nature of their plants.





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