Pub Date : 2020-12-03DOI: 10.1177/1783591720977098
C. Ducuing
Infrastructures have mostly developed and have also been regulated in silo, especially in the liberalization phase. As economic, societal and technological patterns toward convergence of infrastructure sectors can now be observed, how to regulate such phenomena obviously raises many questions. In this context, the cross-sector regulation laid down by the Directive 2014/61/EU on measures to reduce the cost of deploying high-speed electronic communications networks constitutes an interesting legal primer in EU law, although little discussed. Six years after the adoption of the Directive, the present paper aims to draw lessons from it, from its transposition and from the related dispute-settlement practice in the Member States, with the perspective of cross-sector regulation. What type of cross-sector regulation does the Directive bring about? What are the factors having an influence on the (im)balance between the sectors and/or sectoral regulations? It seems all the more necessary that the newly appointed European Commission (“EC”) announced its willingness to revise the Directive within the next 5 years. The study of the BCR Directive may also contribute to inform how to regulate the phenomenon of increasing convergence between network industries. The paper refers to “cross-sector regulation” as, broadly, a type of regulation where several sectors, traditionally subject to specific regulations, are brought together, irrespective of the mode of interaction between them. Particularly, “cross-sector regulation” does not assume that the sectors and/or the sectoral regulations would be placed on an equal footing.
{"title":"The Broadband Cost Reduction Directive: A legal primer in cross-sector regulation of infrastructures","authors":"C. Ducuing","doi":"10.1177/1783591720977098","DOIUrl":"https://doi.org/10.1177/1783591720977098","url":null,"abstract":"Infrastructures have mostly developed and have also been regulated in silo, especially in the liberalization phase. As economic, societal and technological patterns toward convergence of infrastructure sectors can now be observed, how to regulate such phenomena obviously raises many questions. In this context, the cross-sector regulation laid down by the Directive 2014/61/EU on measures to reduce the cost of deploying high-speed electronic communications networks constitutes an interesting legal primer in EU law, although little discussed. Six years after the adoption of the Directive, the present paper aims to draw lessons from it, from its transposition and from the related dispute-settlement practice in the Member States, with the perspective of cross-sector regulation. What type of cross-sector regulation does the Directive bring about? What are the factors having an influence on the (im)balance between the sectors and/or sectoral regulations? It seems all the more necessary that the newly appointed European Commission (“EC”) announced its willingness to revise the Directive within the next 5 years. The study of the BCR Directive may also contribute to inform how to regulate the phenomenon of increasing convergence between network industries. The paper refers to “cross-sector regulation” as, broadly, a type of regulation where several sectors, traditionally subject to specific regulations, are brought together, irrespective of the mode of interaction between them. Particularly, “cross-sector regulation” does not assume that the sectors and/or the sectoral regulations would be placed on an equal footing.","PeriodicalId":38329,"journal":{"name":"Competition and Regulation in Network Industries","volume":"22 1","pages":"3 - 19"},"PeriodicalIF":0.0,"publicationDate":"2020-12-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/1783591720977098","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48018456","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-11-06DOI: 10.1177/1783591720970340
S. Phang
In several countries that have privatised their utilities, power and water are separate industries regulated by sector-specific regulators. In a parallel development, desalination has become an important source of water supply in countries where there is a shortage of cheap and clean freshwater. Where the energy source is gas, the use of gas-fired power plants to supply electricity for desalination links the water, electricity and gas industries. We use the case of the financial collapse of an integrated water and power project to illustrate the problems that can arise from such convergence, and to draw lessons for firms, Public-Private Partnerships (PPPs) and regulators. A water company had successfully tendered to build a desalination plant for a water agency that would deliver an agreed volume of water per day for a 25-year period. The technology proposed was an integrated on-site power plant to supply electricity to the desalination plant as well as to the electricity grid. The business model was for profits from electricity sales to cross-subsidise water desalination costs. However, a combination of take-or-pay LNG contracts and low spot prices in a competitive electricity market led to deep operating losses. The reasons for the collapse of the business were neither technological nor operational but arose from failure to adequately manage the market risks arising from infrastructure convergence, competition, long-term rigid contractual arrangements and missing markets. The case highlights the importance of risk assessment at bidding stage and, in particular, the risks that a cross-subsidy can create. Viewed in this context, our recommendations are for regulatory convergence for converging infrastructure sectors, multi-sector risk assessments for PPP contracts, crafting flexible PPP contracts in anticipation of future adjustments, development of more liquid hedging markets and promoting competition where feasible in infrastructure sectors.
{"title":"The convergence of water, electricity and gas industries: Implications for PPP design and regulation","authors":"S. Phang","doi":"10.1177/1783591720970340","DOIUrl":"https://doi.org/10.1177/1783591720970340","url":null,"abstract":"In several countries that have privatised their utilities, power and water are separate industries regulated by sector-specific regulators. In a parallel development, desalination has become an important source of water supply in countries where there is a shortage of cheap and clean freshwater. Where the energy source is gas, the use of gas-fired power plants to supply electricity for desalination links the water, electricity and gas industries. We use the case of the financial collapse of an integrated water and power project to illustrate the problems that can arise from such convergence, and to draw lessons for firms, Public-Private Partnerships (PPPs) and regulators. A water company had successfully tendered to build a desalination plant for a water agency that would deliver an agreed volume of water per day for a 25-year period. The technology proposed was an integrated on-site power plant to supply electricity to the desalination plant as well as to the electricity grid. The business model was for profits from electricity sales to cross-subsidise water desalination costs. However, a combination of take-or-pay LNG contracts and low spot prices in a competitive electricity market led to deep operating losses. The reasons for the collapse of the business were neither technological nor operational but arose from failure to adequately manage the market risks arising from infrastructure convergence, competition, long-term rigid contractual arrangements and missing markets. The case highlights the importance of risk assessment at bidding stage and, in particular, the risks that a cross-subsidy can create. Viewed in this context, our recommendations are for regulatory convergence for converging infrastructure sectors, multi-sector risk assessments for PPP contracts, crafting flexible PPP contracts in anticipation of future adjustments, development of more liquid hedging markets and promoting competition where feasible in infrastructure sectors.","PeriodicalId":38329,"journal":{"name":"Competition and Regulation in Network Industries","volume":"21 1","pages":"380 - 395"},"PeriodicalIF":0.0,"publicationDate":"2020-11-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/1783591720970340","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48526279","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-10-07DOI: 10.1177/1783591720954118
P. V. van Baal, M. Finger
A convergence of the electricity and the transportation sectors can be observed, with private and public transport being increasingly electrified and with aggregated electricity demand and storage being increasingly operated as flexible assets. At the same time, sustainability concerns are driving systemic changes in both systems. This article introduces the concept of the energy-mobility system, which is a result of this convergence, and proposes an integrated framework for policy and governance of the energy-mobility system. The framework focuses on cross-sectoral policy ambitions related to climate change mitigation, namely reducing energy consumption, electrifying fossil fueled transport, decarbonizing electricity generation, promoting resilience, and integrating green infrastructure management. Public policy and the corresponding regulation are no longer conceptualized and executed in each sector separately. An integrated policy framework is indeed needed for the energy-mobility system, so that the institutions remain relatively aligned with the technological developments. The requirements for effective governance of the energy-mobility system are then discussed, which include an energy-mobility system operator. The potential for the policy and governance framework is addressed through a case study of the Swiss Federal Railways, which as the owner and operator of a fully electrified rail network and associated electricity infrastructure is already close to taking up such a role. While the Swiss case is unique, it can offer insight for other countries developing their regulatory approach to the convergence of the energy and mobility systems.
{"title":"The energy-mobility system in transition: The case of the Swiss Federal Railways","authors":"P. V. van Baal, M. Finger","doi":"10.1177/1783591720954118","DOIUrl":"https://doi.org/10.1177/1783591720954118","url":null,"abstract":"A convergence of the electricity and the transportation sectors can be observed, with private and public transport being increasingly electrified and with aggregated electricity demand and storage being increasingly operated as flexible assets. At the same time, sustainability concerns are driving systemic changes in both systems. This article introduces the concept of the energy-mobility system, which is a result of this convergence, and proposes an integrated framework for policy and governance of the energy-mobility system. The framework focuses on cross-sectoral policy ambitions related to climate change mitigation, namely reducing energy consumption, electrifying fossil fueled transport, decarbonizing electricity generation, promoting resilience, and integrating green infrastructure management. Public policy and the corresponding regulation are no longer conceptualized and executed in each sector separately. An integrated policy framework is indeed needed for the energy-mobility system, so that the institutions remain relatively aligned with the technological developments. The requirements for effective governance of the energy-mobility system are then discussed, which include an energy-mobility system operator. The potential for the policy and governance framework is addressed through a case study of the Swiss Federal Railways, which as the owner and operator of a fully electrified rail network and associated electricity infrastructure is already close to taking up such a role. While the Swiss case is unique, it can offer insight for other countries developing their regulatory approach to the convergence of the energy and mobility systems.","PeriodicalId":38329,"journal":{"name":"Competition and Regulation in Network Industries","volume":"21 1","pages":"367 - 379"},"PeriodicalIF":0.0,"publicationDate":"2020-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/1783591720954118","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43251495","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-09-01DOI: 10.1177/1783591720952908
M. Finger
{"title":"Introduction: Regulation of airports","authors":"M. Finger","doi":"10.1177/1783591720952908","DOIUrl":"https://doi.org/10.1177/1783591720952908","url":null,"abstract":"","PeriodicalId":38329,"journal":{"name":"Competition and Regulation in Network Industries","volume":"21 1","pages":"221 - 222"},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/1783591720952908","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45536124","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-08-19DOI: 10.1177/1783591720943756
Stephen Jarman, D. D. K. Örsal
The modern economy is flooded with products that have no monetary price. However, it is becoming something of an established fact that many zero-price products are not ‘free’ but rather incur costs for consumers in other ways. Many governments intervene in markets when consumers are not being given a fair price for their products. If the costs to consumers for some products are not monetary however, how can governments evaluate whether the costs that consumers are incurring are too high? We seek to answer this question by assessing the approaches of the US and the EU to zero-price markets as informed by their legal and ideological traditions. We offer potential policy solutions while outlining the difficulties that accompany government intervention in zero-price markets and the obstacles when it comes to measuring non-monetary forms of consumer cost.
{"title":"The regulation of zero-price markets by the competition authorities in the USA and the EU","authors":"Stephen Jarman, D. D. K. Örsal","doi":"10.1177/1783591720943756","DOIUrl":"https://doi.org/10.1177/1783591720943756","url":null,"abstract":"The modern economy is flooded with products that have no monetary price. However, it is becoming something of an established fact that many zero-price products are not ‘free’ but rather incur costs for consumers in other ways. Many governments intervene in markets when consumers are not being given a fair price for their products. If the costs to consumers for some products are not monetary however, how can governments evaluate whether the costs that consumers are incurring are too high? We seek to answer this question by assessing the approaches of the US and the EU to zero-price markets as informed by their legal and ideological traditions. We offer potential policy solutions while outlining the difficulties that accompany government intervention in zero-price markets and the obstacles when it comes to measuring non-monetary forms of consumer cost.","PeriodicalId":38329,"journal":{"name":"Competition and Regulation in Network Industries","volume":"21 1","pages":"315 - 343"},"PeriodicalIF":0.0,"publicationDate":"2020-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/1783591720943756","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44024162","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-07-27DOI: 10.1177/1783591720941678
Tobias Binz
I present a graphical framework based on Subrahmanyam and Thomadakis (1980) that allows to study the impact from firm and market characteristics on systematic risk associated with the return on capital, i.e. Beta risk, for utilities under price control. Within this framework, Beta risk is driven by the magnitude of profit fluctuations following demand shocks. The framework is then applied to airport firm characteristics and airport market environment features. I find that the frequency of price control resets, the level of operating leverage, the extent of capacity constraints, and the degree of market power all have an unambiguous effect on the level of Beta risk. The scope of the regulatory perimeter and the type of traffic mix may also affect Beta risk; however, the magnitude and direction of their impact rely on the specifics of the case. The article may assist policy makers to formulate economically sound recommendations on how the regulatory rate of return for airport operators should be determined. Specifically, my findings suggest criteria that can be used to choose adequate peer companies of comparable systematic risk.
{"title":"How do firm and market characteristics affect airports’ Beta risk?","authors":"Tobias Binz","doi":"10.1177/1783591720941678","DOIUrl":"https://doi.org/10.1177/1783591720941678","url":null,"abstract":"I present a graphical framework based on Subrahmanyam and Thomadakis (1980) that allows to study the impact from firm and market characteristics on systematic risk associated with the return on capital, i.e. Beta risk, for utilities under price control. Within this framework, Beta risk is driven by the magnitude of profit fluctuations following demand shocks. The framework is then applied to airport firm characteristics and airport market environment features. I find that the frequency of price control resets, the level of operating leverage, the extent of capacity constraints, and the degree of market power all have an unambiguous effect on the level of Beta risk. The scope of the regulatory perimeter and the type of traffic mix may also affect Beta risk; however, the magnitude and direction of their impact rely on the specifics of the case. The article may assist policy makers to formulate economically sound recommendations on how the regulatory rate of return for airport operators should be determined. Specifically, my findings suggest criteria that can be used to choose adequate peer companies of comparable systematic risk.","PeriodicalId":38329,"journal":{"name":"Competition and Regulation in Network Industries","volume":"21 1","pages":"297 - 312"},"PeriodicalIF":0.0,"publicationDate":"2020-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/1783591720941678","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45412905","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-07-16DOI: 10.1177/1783591720937876
V. Bilotkach, Harry Bush
In this study, we describe the results of a questionnaire distributed among European airports in the autumn of 2019. The questionnaire was designed to elicit airports’ views on the practicalities of competition between airports. We received 49 responses from airports in 24 countries; the respondents represent airports of different sizes. The survey results evidence behaviours consistent with significant competition between airports. Airports are taking active steps through their resourcing and staffing, incentives and marketing to attract airline services, and clearly see themselves taking the initiative in doing so. No airport, no matter how large, appears to be able to escape competition. The main policy message of our study, consistent with other recent reviews of airport competition, is that European regulators should re-evaluate their approach to the economic regulation of airports, especially as far as regional airports are concerned.
{"title":"Airport competition from airports’ perspective: Evidence from a survey of European airports","authors":"V. Bilotkach, Harry Bush","doi":"10.1177/1783591720937876","DOIUrl":"https://doi.org/10.1177/1783591720937876","url":null,"abstract":"In this study, we describe the results of a questionnaire distributed among European airports in the autumn of 2019. The questionnaire was designed to elicit airports’ views on the practicalities of competition between airports. We received 49 responses from airports in 24 countries; the respondents represent airports of different sizes. The survey results evidence behaviours consistent with significant competition between airports. Airports are taking active steps through their resourcing and staffing, incentives and marketing to attract airline services, and clearly see themselves taking the initiative in doing so. No airport, no matter how large, appears to be able to escape competition. The main policy message of our study, consistent with other recent reviews of airport competition, is that European regulators should re-evaluate their approach to the economic regulation of airports, especially as far as regional airports are concerned.","PeriodicalId":38329,"journal":{"name":"Competition and Regulation in Network Industries","volume":"21 1","pages":"275 - 296"},"PeriodicalIF":0.0,"publicationDate":"2020-07-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/1783591720937876","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46026789","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-07-07DOI: 10.1177/1783591720936977
Nicolò Avogadro, Sebastian Birolini, M. Cattaneo, P. Malighetti, C. Morlotti, Renato Redondi
Over the past years, airport regulation has been generating a lot of interest in Europe, and despite the passing of Airport Charges Directive in 2009, there is ongoing debate on the need for introducing tighter airport regulations. The aim of the paper is twofold. First, acknowledging that regulation is usually applied in markets where competition is weak or absent, we evaluate the ex-ante need for price regulation in the air transport industry. By focusing on the Italian airport industry, our analysis provides evidence of a high level of competitive pressure faced by airports (both inside and outside the industry), suggesting that tighter price regulation may not be the optimal solution. Second, assuming that stricter regulation of the airport industry is necessary, we empirically investigate the applicability of yardstick regulation to the Italian airport system, outlining critical challenges and issues that may arise when applying benchmarking techniques in setting the optimum level of efficiency at regulated airports. According to current literature, applicability of empirical benchmarking techniques requires some basic research requirements to be met, such as high-quality data, a homogeneous production function, and a sufficient number of comparable observations. We find that both heterogeneity and the relatively small number of comparable airports, along with the complexity of gathering proper data, may compromise the applicability of a regulation scheme based on yardstick principles at the national level.
{"title":"Yardstick Regulation in a Competitive Context? The Case of the Italian Airports","authors":"Nicolò Avogadro, Sebastian Birolini, M. Cattaneo, P. Malighetti, C. Morlotti, Renato Redondi","doi":"10.1177/1783591720936977","DOIUrl":"https://doi.org/10.1177/1783591720936977","url":null,"abstract":"Over the past years, airport regulation has been generating a lot of interest in Europe, and despite the passing of Airport Charges Directive in 2009, there is ongoing debate on the need for introducing tighter airport regulations. The aim of the paper is twofold. First, acknowledging that regulation is usually applied in markets where competition is weak or absent, we evaluate the ex-ante need for price regulation in the air transport industry. By focusing on the Italian airport industry, our analysis provides evidence of a high level of competitive pressure faced by airports (both inside and outside the industry), suggesting that tighter price regulation may not be the optimal solution. Second, assuming that stricter regulation of the airport industry is necessary, we empirically investigate the applicability of yardstick regulation to the Italian airport system, outlining critical challenges and issues that may arise when applying benchmarking techniques in setting the optimum level of efficiency at regulated airports. According to current literature, applicability of empirical benchmarking techniques requires some basic research requirements to be met, such as high-quality data, a homogeneous production function, and a sufficient number of comparable observations. We find that both heterogeneity and the relatively small number of comparable airports, along with the complexity of gathering proper data, may compromise the applicability of a regulation scheme based on yardstick principles at the national level.","PeriodicalId":38329,"journal":{"name":"Competition and Regulation in Network Industries","volume":"21 1","pages":"244 - 274"},"PeriodicalIF":0.0,"publicationDate":"2020-07-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/1783591720936977","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47790559","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-07-03DOI: 10.1177/1783591720935767
K. Button
This paper offers an overview of what we know about the impacts of the economic regulation of commercial airports. It offers no new empirical findings, but rather considers the challenges of conducting ex post analysis of regulatory reform. It provides an overview of what completed studies have found and assesses whether regulations have achieved their objectives. Little is said about the desirability of these objectives. The focus is on the infrastructure needed to provide commercial passenger air services. Part of the discussion concerns the extent to which the results found in more recent studies offer replication of earlier findings. One function of applied analysis is to offer confirmation or refutation of the findings of prior studies, but this is often given short shrift compared to “novelty.” The paper focuses, in particular, on matters concerning ownership, slot allocation, and supplementary incomes.
{"title":"Studying the empirical implications of the liberalization of airport markets","authors":"K. Button","doi":"10.1177/1783591720935767","DOIUrl":"https://doi.org/10.1177/1783591720935767","url":null,"abstract":"This paper offers an overview of what we know about the impacts of the economic regulation of commercial airports. It offers no new empirical findings, but rather considers the challenges of conducting ex post analysis of regulatory reform. It provides an overview of what completed studies have found and assesses whether regulations have achieved their objectives. Little is said about the desirability of these objectives. The focus is on the infrastructure needed to provide commercial passenger air services. Part of the discussion concerns the extent to which the results found in more recent studies offer replication of earlier findings. One function of applied analysis is to offer confirmation or refutation of the findings of prior studies, but this is often given short shrift compared to “novelty.” The paper focuses, in particular, on matters concerning ownership, slot allocation, and supplementary incomes.","PeriodicalId":38329,"journal":{"name":"Competition and Regulation in Network Industries","volume":"21 1","pages":"223 - 243"},"PeriodicalIF":0.0,"publicationDate":"2020-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/1783591720935767","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45218084","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-06-01DOI: 10.1177/1783591719879365
P. V. van Baal
Switzerland is considering implementing a strategic energy reserve, a novel policy instrument that remunerates power plant operators for storing a minimum amount of energy in reservoirs to convert into electricity when called upon. The policy is envisioned for the winter period, when the country’s large hydropower reservoirs tend to be nearly depleted. This study analyzes the impact of such a strategic energy reserve on security of supply, consumer costs, international trade, and sustainability. A hybrid simulation model is developed that combines agent-based modeling and system dynamics. The simulations show that the reserve can improve short-term security of supply but does not improve long-term security of supply as it does not impact domestic investments or reduce the import dependency in winter. The reserve leads to a slight increase in consumer costs, even when including the reduction in outage costs. A larger reserve is more effective at reducing the supply risk but is proportionally costly. Lastly, we find that the policy induces scarcity periods that would not have occurred otherwise, which means that the reserve should have a high strike price to ensure it is only called upon as a last resort. We conclude that there is no structural need for a strategic energy reserve, as it only increases short-term security of supply and does not contribute to solving the structural problem. Any implementation should be done on an ad hoc basis, conditional on a short-term generation adequacy assessment. This has the potential to minimize the associated costs while maximizing the benefits.
{"title":"Effectiveness of a strategic energy reserve during the energy transition: The case of Switzerland","authors":"P. V. van Baal","doi":"10.1177/1783591719879365","DOIUrl":"https://doi.org/10.1177/1783591719879365","url":null,"abstract":"Switzerland is considering implementing a strategic energy reserve, a novel policy instrument that remunerates power plant operators for storing a minimum amount of energy in reservoirs to convert into electricity when called upon. The policy is envisioned for the winter period, when the country’s large hydropower reservoirs tend to be nearly depleted. This study analyzes the impact of such a strategic energy reserve on security of supply, consumer costs, international trade, and sustainability. A hybrid simulation model is developed that combines agent-based modeling and system dynamics. The simulations show that the reserve can improve short-term security of supply but does not improve long-term security of supply as it does not impact domestic investments or reduce the import dependency in winter. The reserve leads to a slight increase in consumer costs, even when including the reduction in outage costs. A larger reserve is more effective at reducing the supply risk but is proportionally costly. Lastly, we find that the policy induces scarcity periods that would not have occurred otherwise, which means that the reserve should have a high strike price to ensure it is only called upon as a last resort. We conclude that there is no structural need for a strategic energy reserve, as it only increases short-term security of supply and does not contribute to solving the structural problem. Any implementation should be done on an ad hoc basis, conditional on a short-term generation adequacy assessment. This has the potential to minimize the associated costs while maximizing the benefits.","PeriodicalId":38329,"journal":{"name":"Competition and Regulation in Network Industries","volume":"21 1","pages":"65 - 90"},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/1783591719879365","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45838475","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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