4,935 research outputs found
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The Role of Behavioural Economics in Energy and Climate Policy
This article explores how behavioural economics can be applied to
energy and climate policy. We present an overview of main concepts of
behavioural economics and discuss how they differ from the
assumptions of neoclassical economics. Next, we discuss how
behavioural economics applies to three areas of energy policy: (1)
consumption and habits, (2) investment in energy efficiency, and (3)
provision of public goods and support for pro-environmental behaviour.
We conclude that behavioural economics seems unlikely to provide the
magic bullet to reduce energy consumption by the magnitude required
by the International Energy Agency's “450” climate policy scenario.
However it offers new suggestions as to where to start looking for
potentially sustainable changes in energy consumption. We believe that
the most useful role within climate policy is in addressing issues of
public perception of the affordability of climate policy and in facilitating
the creation of a more responsive energy demand, better capable of
responding to weather-induced changes in renewable electricity supply
How Much Market Do Market-Based Instruments Create?: An Analysis for the Case of "White" Certificates
In the context of economic instruments for more energy efficiency and climate protection, tradable certificates have been investigated for renewable energy and for a number of emissions. In contrast, tradable energy efficiency - or "white" - certificates have only lately been considered as a market-based tool to foster energy efficiency as compared to standards and labelling, for example. Theoretically, there is little doubt about the advantages. In practice, however, somefundamental problems arise. Critical issues are the design of an efficient artificial market for "white" certificates, its compatibility with the European emissions trading system, the identification of a suitable target group for an energy efficiency obligation and the measurement of energy savings as compared to a reference use of energy. We use the theoretical framework of Transaction Cost Economics to elaborate these issues. We conclude that transaction costs and investment specificity will restrict markets for "white" certificates in practise. Long-term contracts rather than spot trade will be the prevailing form of governance for energy efficiency investments.Tradable certificates; Energy efficiency; Transaction cost
Modelling Irrational Behaviour of Residential End Users using Non-Stationary Gaussian Processes
Demand response (DR) plays a critical role in ensuring efficient electricity
consumption and optimal usage of network assets. Yet, existing DR models often
overlook a crucial element, the irrational behaviour of electricity end users.
In this work, we propose a price-responsive model that incorporates key aspects
of end-user irrationality, specifically loss aversion, time inconsistency, and
bounded rationality. To this end, we first develop a framework that uses
Multiple Seasonal-Trend decomposition using Loess (MSTL) and non-stationary
Gaussian processes to model the randomness in the electricity consumption by
residential consumers. The impact of this model is then evaluated through a
community battery storage (CBS) business model. Additionally, we propose a
chance-constrained optimisation model for CBS operation that deals with the
unpredictability of the end-user irrationality. Our simulations using
real-world data show that the proposed DR model provides a more realistic
estimate of price-responsive behaviour considering irrationality. Compared to a
deterministic model that cannot fully take into account the irrational
behaviour of end users, the chance-constrained CBS operation model yields an
additional 19% revenue. In addition, the business model reduces the electricity
costs of end users with a rooftop solar system by 11%.Comment: This manuscript has been submitted to IEEE Transactions on Smart Grid
for possible publicatio
The Rebound Effect: Some Questions Answered
Greenhouse gas (and other pollutant) emissions from energy use are now taken to be a problem both internationally and for individual national and regional governments. A number of mechanisms are being employed to reduce energy consumption demand as part of climate and energy policies internationally. A central policy focus is increased efficiency in the use of energy. However, the straightforward link between increased energy efficiency and reduced energy consumption has been questioned. This is due to the notion of the ‘rebound effect’. Rebound occurs when improvements in energy efficiency actually stimulate the direct and indirect demand for energy in production and/or consumption. It is triggered by the fact that an increase in the efficiency in the use of energy acts to reduce the implicit price of energy, or the price of effective energy services for each physical unit of energy used. Thus, it is an economic phenomenon. The rebound effect implies that measures taken to reduce energy use might lead to increases in carbon emissions, or at least not offset them to the extent anticipated. It is possible to distiguish between direct rebound effects in energy consumption in the activity where energy efficiency has increased, indirect rebound effects from income and substitutuion effects and economy-wide rebound effects (impacts on macro-level energy use). This paper attempts to provide a non-technical overview of work on the latter, carried out under an ESRC-funded project investigating the source and magnitude of econom-wide rebound effects from increased energy efficiency in the UK.General equilibrium, energy efficiency, rebound effects, disinvestment.
Incentive Design for Direct Load Control Programs
We study the problem of optimal incentive design for voluntary participation
of electricity customers in a Direct Load Scheduling (DLS) program, a new form
of Direct Load Control (DLC) based on a three way communication protocol
between customers, embedded controls in flexible appliances, and the central
entity in charge of the program. Participation decisions are made in real-time
on an event-based basis, with every customer that needs to use a flexible
appliance considering whether to join the program given current incentives.
Customers have different interpretations of the level of risk associated with
committing to pass over the control over the consumption schedule of their
devices to an operator, and these risk levels are only privately known. The
operator maximizes his expected profit of operating the DLS program by posting
the right participation incentives for different appliance types, in a publicly
available and dynamically updated table. Customers are then faced with the
dynamic decision making problem of whether to take the incentives and
participate or not. We define an optimization framework to determine the
profit-maximizing incentives for the operator. In doing so, we also investigate
the utility that the operator expects to gain from recruiting different types
of devices. These utilities also provide an upper-bound on the benefits that
can be attained from any type of demand response program.Comment: 51st Annual Allerton Conference on Communication, Control, and
Computing, 201
The early diffusion of smart meters in the US electric power industry
The impact of new technologies within and across industries is only felt through their widespread diffusion, yet studies of technology diffusion are scarce compared to other aspects of the innovation process. The electric power industry is one industry that is currently undergoing substantial change as a result of both technological and institutional innovations. In this dissertation I examine the economic rationale for the adoption of smart meters by electric power utilities and the relationship between smart meters and the evolving electric power industry. I contribute to empirical research on technology diffusion by studying the early diffusion of smart meters in the US electric power industry. Using a panel dataset and econometric models, I analyze the determinants of both the interfirm and intrafirm diffusion of smart meters in the United States. The empirical findings suggest multiple drivers of smart meter diffusion. Policy and regulatory support have had a significant, positive impact on adoption but have not been the only relevant determinants. The findings also suggest that utility characteristics and some combination of learning, cost reductions, and technology standards have been important determinants affecting smart meter diffusion. I also explore the policy implications resulting from this analysis for enhancing the diffusion of smart meters. The costs and benefits of adopting smart meters have been more uncertain than initially thought, suggesting that some policy support for adoption was premature. The coordination of policies is also necessary to achieve the full benefits of using smart meters
Approaching Prosumer Social Optimum via Energy Sharing with Proof of Convergence
With the advent of prosumers, the traditional centralized operation may become impracticable due to computational burden, privacy concerns, and conflicting interests. In this paper, an energy sharing mechanism is proposed to accommodate prosumers’ strategic decision-making on their self-production and demand in the presence of capacity constraints. Under this setting, prosumers play a generalized Nash game. We prove main properties of the game: an equilibrium exists and is partially unique; no prosumer is worse off by energy sharing and the price-of-anarchy is 1-O(1/I) where I is the number of prosumers. In particular, the PoA tends to 1 with a growing number of prosumers, meaning that the resulting total cost under the proposed energy sharing approaches social optimum. We prove that the corresponding prosumers’ strategies converge to the social optimal solution as well. Finally we propose a bidding process and prove that it converges to the energy sharing equilibrium under mild conditions. Illustrative examples are provided to validate the results
Recommended from our members
The role of behavioural economics in energy and climate policy
This article explores how behavioural economics can be applied to energy and climate policy. We present an overview of main concepts of behavioural economics and discuss how they differ from the assumptions of neoclassical economics. Next, we discuss how behavioural economics applies to three areas of energy policy: (1) consumption and habits, (2) investment in energy efficiency, and (3) provision of public goods and support for pro-environmental behaviour. We conclude that behavioural economics seems unlikely to provide the magic bullet to reduce energy consumption by the magnitude required by the International Energy Agency's “450” climate policy scenario. However it offers new suggestions as to where to start looking for potentially sustainable changes in energy consumption. We believe that the most useful role within climate policy is in addressing issues of public perception of the affordability of climate policy and in facilitating the creation of a more responsive energy demand, better capable of responding to weather-induced changes in renewable electricity supply
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