Discussing Energy Economics on the Internet

Energy Market Reform: Again

Posted in Market Design,UK by Cheryl Morgan on the July 12th, 2011

Today the British government issued a new white paper on energy market reform. I have been on aircraft most of the day (and am now in Finland) so I have missed most of the excitement. Fortunately there are plenty of reports online. Reuters has a summary of what is proposed.

Basically it sounds like the government has come to the conclusion that electricity generators will not build new capacity unless they are given firm guarantees of long term prices (or spot prices are allowed to rise significantly, which is something the government is probably scared of). It all sounds very much like the dear old “dash for gas” of the 1990s. Let’s hope these new contracts don’t end up underwater.

Possibly the most interesting part of the report is this:

The government’s electricity market reform white paper, aimed at introducing reforms to take effect by mid-2013, failed to decide on a capacity mechanism which ensures enough back-up power capacity is available at peak demand times.

The government said it would make a decision on that by the end of the year with two alternatives possible.

Either it will opt for centrally procured capacity that is removed from the energy market or a market-wide mechanism in which providers offering peak capacity will be incentivized.

I foresee a big upsurge in the demand for market analysis.

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USAEE 2009 – Thursday Evening

Posted in Climate,Conferences,Demand Management,Louisiana,Market Design by Cheryl Morgan on the December 4th, 2008

I caught a plenary session on demand management and renewables that was quite interesting. Brandi Colander of NRDC gave a lightning fast presentation on demand reduction starting from the fact that DR is apparently much cheaper than generation, but no one puts any money into it. There are many reasons for this, but one that I hadn’t thought of before is rental property. If a property is rented and the tenant pays the energy bills then the landlord has no incentive to improve the property, but if the landlord pays the energy bills then the tenant has no incentive to manage usage. Regulatory issues play a part too, and Brandi was very hot on the need to decouple utility profits from the process of selling more energy.

The session on restructured markets majored on issues regarding whether consumers are better off under deregulation. Jay Zarnikau revealed that in Texas prices had risen much more in the areas of retail competition than in areas where prices are still regulated, but the market is young and that could simply be a matter of private companies passing on costs more quickly than regulators. John Kelly of APPA claimed that prices in the PJM have risen much more sharply than prices in neighboring regulated states, but it is one thing to say that this has happened and another to prove that it is the result of anti-competitive behavior.

The Japanese are apparently worried about their nuclear industry because no one wants to work in it. This is a story that the UK can probably relate to.

The winner of the student paper contest was Derek M Lemoine from Berkeley for a paper using real options to value plug-in hybrid vehicles. Go Bears! (And yes, one of the other finalists was from Stanford.)

The after dinner speaker was Brent W. Dorsey, the Director of Corporate Environmental programs at Entergy. It is perhaps unsurprising that the company whose systems have been wrecked by hurricanes Rita, Katrina, Gustav and Ike believes in global warming, but it was still a pleasure to hear a senior utility executive not only say so, but quote The Onion to make his point. Of course Entergy’s money is not in the coal business, but Mr. Dorsey recognized the plight of his colleagues in the industry and made an impassioned plea for the US to become a world leader in technologies such as clean coal and carbon sequestration, which it could then export to China and India.

We have another full day of program tomorrow.

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A New Power Exchange for the UK?

Posted in Market Design,Trading,UK by Cheryl Morgan on the July 15th, 2008

Long, long ago and far, far away, the UK decided to get rid of the famous Pool and set up a trading-based market instead. Questions were asked as to whether an official exchange would be established as part of the new market design, but Professor Littlechild, then head of OFFER, decided to let the market decide. There were, after all, many firms eager and willing to set up exchanges. Where are they all now?

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