A Real Options Evaluation Model for the Diffusion Prospects of New Renewable Power Generation Technologies

This study presents an investment planning model that integrates learning curve information on renewable power generation technologies into a dynamic programming formulation featuring real options analysis. The model recursively evaluates a set of investment alternatives on a year-by-year basis, thereby taking into account that the flexibility to delay an irreversible investment expenditure can profoundly affect the diffusion prospects of renewable power generation technologies. Price volatility is introduced through stochastic processes for the average electricity price and for input fuel prices. Demand for peak-load capacity is assumed to be increasingly price-elastic, as the electricity market deregulation proceeds, and linearly dependent on the extent of market opening. The empirical analysis is based on data for the Turkish electricity supply industry. Apart from general implications for policymaking, it provides some interesting insights about the impact of uncertainty on the diffusion of various emerging renewable energy technologies.Dynamic programming, Investment planning, Renewable energy technology diffusion, Real options, Learning curve, Turkey

A new perspective on the competitiveness of nations

The capability of firms to survive and to have a competitive advantage in global markets depends on, amongst other things, the efficiency of public institutions, the excellence of educational, health and communications infrastructures, as well as on the political and economic stability of their home country. The measurement of competitiveness and strategy development is thus an important issue for policy-makers. Despite many attempts to provide objectivity in the development of measures of national competitiveness, there are inherently subjective judgments that involve, for example, how data sets are aggregated and importance weights are applied. Generally, either equal weighting is assumed in calculating a final index, or subjective weights are specified. The same problem also occurs in the subjective assignment of countries to different clusters. Developed as such, the value of these type indices may be questioned by users. The aim of this paper is to explore methodological transparency as a viable solution to problems created by existing aggregated indices. For this purpose, a methodology composed of three steps is proposed. To start, a hierarchical clustering analysis is used to assign countries to appropriate clusters. In current methods, country clustering is generally based on GDP. However, we suggest that GDP alone is insufficient for purposes of country clustering. In the proposed methodology, 178 criteria are used for this purpose. Next, relationships between the criteria and classification of the countries are determined using artificial neural networks (ANNs). ANN provides an objective method for determining the attribute/criteria weights, which are, for the most part, subjectively specified in existing methods. Finally, in our third step, the countries of interest are ranked based on weights generated in the previous step. Beyond the ranking of countries, the proposed methodology can also be used to identify those attributes that a given country should focus on in order to improve its position relative to other countries, i.e., to transition from its current cluster to the next higher one

Performance of the Public Electric Power Industry: Evidence from Pakistan

The study investigates the performance of electric power sector of Pakistan at the firm level, as well as the sector as a whole. It identifies and attempts to quantify the extent of inefficiencies. Since either physical or financial or productivity indicators alone are not able to explain the duality of public infrastructure purposes and the complexity of their multi-dimensional goals, a set of relevant physical, financial, and productivity indicators have been used in evaluating the performance of this sector. Further, a Cobb- Douglas production function has also been used to calculate the trend in the growth of total factor productivity. Economies of scale have also been studied in the case of electric power generation.

Bosnia and Herzegovina - Meeting Copenhagen economic criteria for accession to the EU

Delegation of the European Commission based in Sarajevo, Bosnia and Herzegovina (BH) granted the consortium represented by ECORYS a contract for EU support to the Economic Policy Research Unit, a subdivision of the Economic Policy Planning Unit of the Council of Ministers of Bosnia and Herzegovina. As part of this project activities a subproject was designed trying to assess the position of BH against the benchmarks of the Copenhagen economic criteria and to identify policy measures for meeting the criteria. The issues of particular relevance to the project included: presentation of the Copenhagen economic criteria, analysis of the existing situation in the country, strategic and policy documents addressing the subject, identification of gaps to be filled in order to achieve the benchmark, and policy recommendations. In July, 2006 ECORYS appointed the Center for Social and Economic Research (CASE), an international, non-profit research and advisory institution, to research on the subject. The research project team comprised experts: Messrs. Rafa³ Antczak (team leader), Wojciech Paczyñski, and Ranko Markuš, Mmes. Ma³gorzata Antczak and Karina Kostrzewa, assisted by Mr. Erol Mujanovic. The report was based on available national account and microeconomic data, strategic and policy documents of the BH governmental bodies, relevant reports by international organisations, EU institutions, academic and research centres and opinions of key stakeholders. The analytical research on the economic developments in BH by international financial institutions, especially the IMF and World Bank, as well as domestic bodies, especially the Economic Policy Research Unit, was extensively exploited in the research. However, the primary focus of the research was on structural and institutional aspects facilitating or impeding functioning of a market economy in the BH and country's capacity to cope with competitive pressure and market forces within the EU. Therefore, the report focuses on background analysis of economic factors influencing the functioning of market economy and the capacity to withstand the competition in the EU market. The research consists of four main parts. In Part 1, the Copenhagen economic criteria are presented in a comparative perspective of the recent experiences of the new member states and acceding countries to allow diagnosing of the most important gaps to be filled by BH. Part 2 analyses macroeconomic developments in BH, presenting them in a comparative perspective relative to EU candidate countries. The special focus is on two fields where BH faces particularly difficult challenges: labour market and foreign trade. Also, the three scenarios of BH catching-up with the EU are presented. Privatisation process which is one of the most important institutional and structural features of every transition economy and especially relevant from the perspective of meeting the Copenhagen criteria is analysed in Part 3. Part 4 comprises analysis of microeconomic developments in BH with the elements of the financial analysis of enterprises, both state and private. The financial analysis of enterprises concentrates on current situation and identification of trends in microeconomic developments to identify comparative advantages, assess productivity, and to position the BH enterprise sector towards the potential competition on the EU markets. Finally, Part 5 includes policy recommendations for decision makers both from the BH government and the EC. The research is supplemented by the Annexes providing background pieces of information on the analysed topics. The project team established contacts with representatives of international organizations, the BH governmental bodies, and research community in BH to collect pieces of information and consult on research topics. However, the authors of the researchers bear the sole responsibility for the pieces of information and opinions presented in the report.Bosnia and Herzegovina, Copenhagen criteria, EU accession, European integration, competitiveness