The future of nuclear power in France: An analysis of the costs of phasing-out

Nuclear power is an important pillar in electricity generation in France. However, France's nuclear power plant fleet is ageing, and the possibility of reducing its share in power generation or even a complete phaseout has been increasingly discussed. Our research therefore focuses on three questions: First, what are the costs of phasing-out nuclear power in France under different scenarios? Second, who has to bear these costs, i.e., how much of the costs will be passed on to the rest of the European power system? And third, what effect does the uncertainty regarding future nuclear policy in France have on system costs? Applying a stochastic optimization model for the European electricity system, we show that additional system costs in France of a nuclear phase-out amount up to 76 billion Euro 2010. Additional costs are mostly borne by the French power system. Surprisingly, we find that the costs of uncertainty are rather limited. Based on our results, we conclude that a commitment regarding nuclear policy reform is only mildly beneficial in terms of system costs

A test of the theory of nonrenewable resources: Controlling for exploration and market power

Despite the central role of the Hotelling model within the theory of nonrenewable resources, tests of the model are rarely found. If existent, these tests tend to ignore two key features, namely market power and exploration. We therefore suggest an extension of the basic Hotelling framework to incorporate exploration activity and market power and propose an implicit price behavior test of the model to indicate whether firms undergo inter-temporal optimization. When applied to a newly constructed data set for the uranium mining industry, the null hypothesis of the firm optimizing inter-temporally is rejected in all settings. However, parameter estimates of the model still yield valuable information on cost structure, resource scarcity and market power. Our results suggest that the shadow price of the resource in situ is comparably small and may be overshadowed by market power, which may serve as an explanation for the firm failing to optimize inter-temporally

Essays in Energy Economics

This thesis presents four essays in energy economics. The first essay investigates one of the workhorse models of resource economics, the Hotelling model of an inter-temporally optimizing resource extracting firm. The Hotelling model provides a convincing theory of fundamental concepts like resource scarcity, but very few empirical validations of the model have been conducted. This essay attempts to empirically validate the Hotelling model by first expanding it to include exploration activity and market power and then using a newly constructed data set for the uranium mining industry to test whether a major resource extracting mining firm in the industry is following the theory’s predictions. The results show that the theory is rejected in all considered settings. The second and third essays investigate the difference in market outcomes under spot-market based trade as compared to long-term contract based trade in oligopolistic markets with investments. The second essay investigates analytically the difference in market outcomes in an electricity market setting, showing that investments and consumer welfare may be higher under spot-market based trade than under long-term contracts. The third essay proposes techniques to solve large-scale models of this kind, empirically, by exploring the practicability of this approach in an application to the international metallurgical coal market. The final essay investigates the influence of policy uncertainty on investment decisions. With France debating the role of nuclear technology, this essay analyses how policy uncertainty regarding nuclear power in France may feature in the French and European power sector. Applying a stochastic model for the European power system, the analysis shows that the costs of uncertainty in this particular application are rather low compared to the overall costs of a nuclear phase-out

Modeling strategic investment decisions in spatial markets

Markets for natural resources and commodities are often oligopolistic. In these markets, production capacities are key for strategic interaction between the oligopolists. We analyze how different market structures influence oligopolistic capacity investments and thereby affect supply, prices and rents in spatial natural resource markets using mathematical programing models. The models comprise an investment period and a supply period in which players compete in quantities. We compare three models, one perfect competition and two Cournot models, in which the product is either traded through long-term contracts or on spot markets in the supply period. Tractability and practicality of the approach are demonstrated in an application to the international metallurgical coal market. Results may vary substantially between the different models. The metallurgical coal market has recently made progress in moving away from long-term contracts and more towards spot market-based trade. Based on our results, we conclude that this regime switch is likely to raise consumer rents but lower producer rents. The total welfare differs only negligibly

Der Merit-Order-Effekt der erneuerbaren Energien - Analyse der kurzen und langen Frist

Unter dem Merit-Order-Effekt (M-O-E) der erneuerbaren Energien (EE) wird deren preissenkende Wirkung auf die Strompreise auf Großhandelsebene (Börsenpreise) verstanden. Sowohl die Höhe des Merit-Order-Effekts in der kurzen und der langen Frist als auch dessen volkswirtschaftliche Bedeutung ist umstritten. In diesem Artikel analysieren wir zunächst, durch welche Faktoren Preiseeffekte erneuerbarer Energien in der kurzen Frist bestimmt werden, unter welchen Bedingungen Preiseffekte in einem theoretischen langfristigen Gleichgewicht möglich sind und welche Preiseffekte in der Realität durch Unsicherheiten und dynamische Anpassungsprozesse entstehen. In einem zweiten Teil berechnen wir mit einem Optimierungsmodell des europäischen Strommarkts den M-O-E für Deutschland bis 2030. Hierbei berücksichtigen wir im Unterschied zu bestehenden Berechnungen zwei wichtige Determinanten des M-O-E endogen: Anpassungsprozesse des Kraftwerksparks sowie Stromaustauschmöglichkeiten mit dem europäischen Ausland

The Costs of Power Interruptions in Germany - an Assessment in the Light of the Energiewende

The German Energiewende’s potential effects on the reliability of electricity supply as well as the corresponding economic consequences have recently entered both the political and scientific debate. However, empirical evidence of power outage costs in Germany is rather scarce. Following a macroeconomic approach, we analyse the economic costs imposed by potential power interruptions in Germany. Investigating a rich data set on industry and households we estimate both Values of Lost Load (VoLLs) and associated costs of power interruptions for different German regions and sectors and every hour of the year. This disaggregated approach allows for conclusions for optimal load shedding in case of technical necessity and the economic efficiency of measures to improve security of supply. We find that interruption costs vary significantly over time, between sectors and regions. Peaking on midday of a Monday in December at 750 Mioe per hour, the average of total national outage costs amount to approximately 430 Mioe per hour. Our results emphasize the prominent regional aspect of the German Energiewende as the regions with the highest estimated cost of interruptions in South and West Germany coincide with the areas which face nuclear power plant shut downs in the near future

German Nuclear Policy Reconsidered: Implications for the Electricity Market

In the aftermath of the nuclear catastrophe in Fukushima, German nuclear policy has been reconsidered. This paper demonstrates the economic effects of an accelerated nuclear phase-out on the German electricity generation sector. A detailed optimization model for European electricity markets is used to analyze two scenarios with different lifetimes for nuclear plants (phase-out vs. prolongation). Based on political targets, both scenarios assume significant electricity demand reductions and a high share of generation from renewable energy sources in Germany. Our principal findings are: First, nuclear capacities are mainly replaced by longer lifetimes of existing coal-fired plants and the construction of new gas-fired plants. Second, fossil fuel-based generation and power imports increase, while power exports are reduced in response to the lower nuclear generation. Third, despite the increased fossil generation, challenging climate protection goals can still be achieved within the framework of the considered scenarios. Finally, system costs and electricity prices are clearly higher. We conclude that the generation sector can generally cope with an accelerated nuclear phase-out under the given assumptions. Yet, we emphasize that such a policy requires a substantial and costly transformation of the supply and the demand side.Nuclear policy; climate protection; renewable energy; electricity market modeling

German Nuclear Policy Reconsidered: Implications for the Electricity Market

In the aftermath of the nuclear catastrophe in Fukushima, German nuclear policy has been reconsidered. This paper demonstrates the economic effects of an accelerated nuclear phase-out on the German electricity generation sector. A detailed optimization model for European electricity markets is used to analyze two scenarios with different lifetimes for nuclear plants (phase-out vs. prolongation). Based on political targets, both scenarios assume significant electricity demand reductions and a high share of generation from renewable energy sources in Germany. Our principal findings are: First, nuclear capacities are mainly replaced by longer lifetimes of existing coal-fired plants and the construction of new gas-fired plants. Second, fossil fuel-based generation and power imports increase, while power exports are reduced in response to the lower nuclear generation. Third, despite the increased fossil generation, challenging climate protection goals can still be achieved within the framework of the considered scenarios. Finally, system costs and electricity prices are clearly higher. We conclude that the generation sector can generally cope with an accelerated nuclear phase-out under the given assumptions. Yet, we emphasize that such a policy requires a substantial and costly transformation of the supply and the demand side

The future of nuclear power in France: an analysis of the costs of phasing-out

Nuclear power is an important pillar in electricity generation in France. However, the French nuclear power plant fleet is ageing, and the possibility of reducing the technology's share in power generation or even a complete phase-out has been increasingly discussed. This paper focuses on three inter-related questions: First, what are the costs of phasing-out nuclear power in France? Second, who has to bear these costs, i.e., how much of the costs will be passed on to the rest of the European power system? And third, what effect does the uncertainty regarding future nuclear policy in France have on system costs? Applying a stochastic optimization model for the European electricity system, the analysis showed that additional system costs in France of a nuclear phase-out amount up to 76 billion is an element of(2010). Additional costs are mostly borne by the French power system. Surprisingly, the analysis found that the costs of uncertainty are rather limited. Based on the results, it can be concluded that a commitment regarding nuclear policy reform is only mildly beneficial in terms of system cost savings. (C) 2016 Elsevier Ltd. All rights reserved

Multi-unit multiple bid auctions in balancing markets: An agent-based Q-learning approach

There is an ongoing debate on the appropriate auction design for competitive electricity balancing markets. Uniform (UPA) and discriminatory price auctions (DPA), the prevalent designs in use today, are assumed to have different properties with regard to prices and efficiencies. These properties cannot be thoroughly described using analytical methods due to the complex strategy space in repeated multi-unit multiple bid auctions. Therefore, using an agent-based Q-learning model, we simulate the strategic bidding behaviour in these auctions under a variety of market conditions. We find that UPAs lead to higher prices in all analysed market settings. This is mainly due to the fact that players engage in bid shading more aggressively. Moreover, small players in UPAs learn to free ride on the price setting of large players and earn higher profits per unit of capacity owned, while they are disadvantaged in DPAs. UPAs also generally feature higher efficiencies, but there are exceptions to this observation. If demand is varying and players are provided with additional information about scarcity in the market, market prices increase only in case asymmetric players are present. (C) 2020 Elsevier B.V. All rights reserved