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Electricity Sectors in Transition

Paul L. Joskow

Year: 1998
Volume: Volume19
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-3
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Abstract:
This paper discusses the structural and regulatory changes that are affecting electricity sectors around the world. The direction of change is toward promoting competition in the supply of generation services, restructuring of electricity supply enterprises to clearly separate the provision of competitive generation services from monopoly transmission and distribution services, and the application of new regulations governing access to the transmission and distribution networks and the associated costs of the services provided by these networks. The potential impacts of these changes on electricity costs and prices, economic development, the distribution of income, the choice of generating technologies, research and development and the environment are discussed. Differences in the current performance and the likely future impacts of electricity sector restructuring on developing and developed countries are discussed.



Customers' Choice Among Retail Energy Suppliers: The Willingness-to-Pay for Service Attributes

Andrew A. Goett, Kathleen Hudson and Kenneth E. Train

Year: 2000
Volume: Volume21
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol21-No4-1
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Abstract:
We examine small/medium commercial and industrial customers' choices among energy suppliers in conjoint-type experiments. The distribution of customers' willingness to pay is estimated for more than 40 attributes of suppliers, including sign-up bonuses, amount and type of renewables, billing options, bundling with other services, reductions in voltage fluctuations, and charitable contributions. These estimates provide guidance for suppliers in designing service options and to economists in anticipating the services that will be offered in competitive retail energy markets.



Markets for Power in the United States: An Interim Assessment

Paul L. Joskow

Year: 2006
Volume: Volume 27
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No1-2
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Abstract:
The transition to competitive wholesale and retail markets for electricity in the U.S. has been a difficult and contentious process. This paper examines the progress that has been made in the evolution of wholesale and retail electricity market institutions. Various indicia of the performance of these market institutions are presented and discussed. Significant progress has been made on the wholesale competition front but major challenges must still be confronted. The framework for supporting retail competition has been less successful, especially for small customers. Empirical evidence suggests that well-designed competitive market reforms have led to performance improvements in a number of dimensions and benefited customers through lower retail prices.



Electricity Retailing in Norway

Nils-Henrik M. von der Fehr and Petter Vegard Hansen

Year: 2010
Volume: Volume 31
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No1-2
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Abstract:
We analyze retailer and household behavior on the Norwegian electricity market, based on detailed information on prices and other market characteristics. We find that there exists a competitive market segment where a number of retailers compete fiercely for customers, with small margins on all products. However, we also find indications of monopolistic behavior, whereby retailers exploit the passivity of some of their customers. We discuss potential explanations for these results.



The Future of Retail Energy Markets

Catherine Waddams Price

Year: 2008
Volume: Volume 29
Number: Special Issue #2
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI2-7
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Abstract:
Britain was one of the first countries to introduce competition to retail energy markets in 1998; after a decade of choice, around half of its residential consumers have switched supplier. This paper presents evidence on consumer and supplier behaviour over the decade since the markets were opened to assess the success of the experience to date. The early debate about the value of extending choice to householders, in which David Newbery was amongst those who expressed doubts, remains to be resolved in an era of rising costs and increasing politicisation. While Britain has coped very well with wholesale market power, ending the domestic franchise and removing regulation from the retail supply margin has exposed households to considerable increases in those margins, as switching costs appear significant, and vertically integrated companies have been effective in exploiting their power. David Newbery, Market Design, EPRG working paper 0515 p.9, 2005



An Econometric Assessment of Electricity Demand in the United States Using Utility-specific Panel Data and the Impact of Retail Competition on Prices

Agustin J. Ros

Year: 2017
Volume: Volume 38
Number: Number 4
DOI: 10.5547/01956574.38.4.aros
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Abstract:
This paper uses a panel data of 72 U.S. electricity distribution companies during the period 1972-2009 to estimate structural demand and reduced-form price models. I find the own-price and income elasticity of demand for residential, commercial, and industrial customers that are generally consistent with the published economics literature. While static models work well for residential demand, dynamic models are more appropriate for the larger customer classes who require more time to adjust. Conditioning on the regressors, I find that residential and commercial electricity demand has been increasing slowly while industrial electricity demand and deflated electricity prices have been decreasing. In all price models I find that total factor productivity is consistently the most significant explanatory factor with a 1% increase in total factor productivity resulting in a reduction in deflated electricity prices ranging between 0.05% and 0.30%, depending on the model. Lastly, I find that retail electricity competition is associated with lower deflated electricity prices with the mean total impact being -4.3%, -8.2% and -11.1% for residential, commercial and industrial customers, respectively and with the impact diminishing over the sample period for residential customers, remaining relatively constant for commercial customers and increasing for industrial customers.



Why Consumers Switch Energy Suppliers: The Role of Individual Attitudes

Xiaoping He and David Reiner

Year: 2017
Volume: Volume 38
Number: Number 6
DOI: https://doi.org/10.5547/01956574.38.6.hxia
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Abstract:
Since 2008, fewer customers switched suppliers in British electricity and gas markets despite the potential for financial gains, suggesting that psychological factors may affect switching behaviors. Using a unique nation-wide British survey, we explore the influence of consumers' attitudes and perceptions on switching behaviors and assess the differences in switching propensity across different groups. Support for simplifying energy tariffs, professed less difficulty in understanding energy bills, expected difficulty in changing suppliers and lack of attention to the issue of energy prices are associated with lower switching activity. At a time of high saliency, political party voting intention was strongly related to switching. Unlike the bivariate analyses conducted by the regulator and the competition authority, our multivariate analysis show few demographic factors affect the likelihood of switching except for educational attainment and tariff payment patterns. Remedies aiming to encourage switching cannot be targeted correctly unless the supporting analysis is robust to alternative model specifications.



Restructuring Revisited Part 1: Competition in Electricity Distribution Systems

Scott P. Burger, Jesse D. Jenkins, Carlos Batlle, and Ignacio J. Pérez-Arriaga

Year: 2019
Volume: Volume 40
Number: Number 3
DOI: 10.5547/01956574.40.3.sbur
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Abstract:
This paper addresses the implications of the emergence of distributed energy resources (DERs) for competition in the electricity distribution systems. The regulations on industry structures in place today were designed in an era characterized by centralized resources and relatively price inelastic demand. In light of the decentralization of the power sector, regulators and policy makers must carefully reconsider how industry structure at the distribution level affects competition, market development, and cost efficiency. We analyze the economic characteristics of distribution network owners and operators, DER owners, and aggregators and retailers. We translate the foundational theories in industrial organization and the lessons learned during the previous wave of power system restructuring to the modern context to provide insight into three questions. First, should distribution system operations be separated from distribution network ownership in order to ensure the neutrality of the DSO role? Second, should DNOs be allowed to own and operate DERs, or should DER ownership be left exclusively to competitive actors? Third, does the emergence of DERs necessitate a reconsideration of the role of competition in the provision of aggregation services such as retailing? This paper is the first part of a two-part series on competition and coordination in rapidly evolving electricity distribution systems.



Switching Energy Suppliers: It’s Not All About the Money

David Deller, Monica Giulietti, Graham Loomes, Catherine Waddams Price, Anna Moniche, and Joo Young Jeon

Year: 2021
Volume: Volume 42
Number: Number 3
DOI: 10.5547/01956574.42.3.ddel
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Abstract:
Many consumers do not take advantage of lower energy prices available in liberalized retail markets. We provide evidence to explain why consumers may leave substantial amounts of �money on the table� in this way. We observe real decisions made by over 7,000 consumers in a collective switching auction, supplemented by their responses to a survey. We identify factors which may inhibit switching and show that expectations of high switching rates in an unregulated market may be unrealistic. Our findings have important implications for the design and regulation of energy markets, including imposition of price caps on �default� retail tariffs in 2019 in the UK and parts of Australia.



Export Growth - Fuel Price Nexus in Developing Countries: Real or False Concern?

Kangni Kpodar, Stefania Fabrizio, and Kodjovi Eklou

Year: 2022
Volume: Volume 43
Number: Number 3
DOI: 10.5547/01956574.43.3.kkpo
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Abstract:
This paper investigates the impact of domestic fuel price increases on export growth in a sample of 77 developing countries over the period 2000-2014. Using a fixed-effect estimator and the local projection approach, we find that an increase in domestic gasoline or diesel price adversely affects real non-fuel export growth, with the impact phasing out within two years after the shock. The impact is mainly noticeable in countries with a high-energy dependency ratio and where access to electricity is limited. Further, large fuel price shocks do not seem to lead to disproportionately large changes in exports, suggesting that neither the gradualism nor the shock therapy approach in fuel subsidy reforms dominates. In countries where the export sector is vulnerable to fuel price shocks, appropriate mitigating measures should be designed to smooth the transition to higher fuel prices.




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