A global carbon market?

This paper explores the prospects for a global carbon market as the centrepiece of any serious attempt to reach the ambitious goal for greenhouse gas (GHG) reductions set by climate scientists. My aim is to clarify the extent to which we know what policy might best support global decarbonisation. We begin by discussing what we might mean by a global carbon market and its theoretical properties. We then go on to discuss the EU Emissions Trading System experience and the recent experience with the Australian carbon tax. Next, we assess recent carbon market initiatives in the US and in China. My argument is that while establishing the amount of emissions required and dividing it up acceptably between countries requires an enormous scientific and international negotiations effort, the economic instruments to deliver the agreed targets are readily at hand.Non

Can current electricity markets cope with high shares of renewables? A comparison of approaches in Germany, the UK and the State of New York

This paper looks at the empirical and theoretical background to high shares of renewables in the electricity system. First we examine what is meant by 'high shares' of renewables; next we consider what we mean by electricity 'markets'; then we discuss what the term 'cope with' implies; before returning to the suitability of 'current' electricity markets. Second, we turn to three examples of jurisdictions – Germany, the UK and the State of New York in the US - with specific aspirations for decarbonisation and the role of renewables. Each exhibits very different approaches to the way they are adjusting their electricity market design to cope with high shares of renewables. We suggest that a new wave of electricity experiments is beginning around the theme of how to incorporate large shares of intermittent renewable generation in to electricity systems

The economics of energy (and electricity) demand

Economic drivers, technologies and demand side management are keys in understanding the long-term trends of both energy and more specifically electricity consumption. This paper discusses some of the important economics foundations of energy demand in general, and electricity in particular. First, we look at the macro-economic context of energy. This reveals how energy and electricity consumption are subject to the same drivers - income and price - over long periods. However, energy demand (and carbon emissions) falls and energy prices rises in one country may have little effect at the world level. Next, we examine the features of energy service expenditures. Despite similarities over time, specific sectors are distinct from one another in terms of consumption profiles, and new sources of electricity demand may substantially change total demand and the way it is consumed. This leads us to a closer look at the micro-economic context of energy demand, and the tension between technically possible energy savings one one side, and the economics and behavioural dimensions on the other side. We conclude by highlighting the various unknowns and uncertainties that characterise the future of energy demand.energy expenditure

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

Integrating distributed generation: regulation and trends in three leading countries

This paper explores the trends in the deployment and integration of distributed generation in Germany, Denmark and Sweden. The study concentrates on the regulation of renewable energy generation with a focus on grid access and connection mechanisms. The high rate of distributed generation penetration is mainly based on the early support that these countries gave to the expansion of renewable energy generation – mainly wind and solar – within their respective national policies. Germany and Denmark are the ones with the most sophisticated support schemes, which have shown a dynamic design over time. In terms of connections, Germany has the most favorable connection regime which provides not only priority connection but also priority grid access for generation units that produce electricity from renewable energy sources. Sweden guarantees equal treatment among different technologies (i.e. a non-discrimination principle). High connection costs have been observed specially in Germany and Denmark. The costs of network upgrades are usually socialised across demand customers. However, integration issues should be taken into consideration in order to avoid expansion of distributed generation in a way which unnecessarily raises total system costs, via high connection costs.The authors wish to acknowledge the financial support of UK Power Networks via the Low Carbon Networks Fund’s Flexible Plug and Play project

The local dimension of energy

In this paper, we postulate that some of the best opportunities for reducing energy demand and carbon emissions are through stronger involvement and leadership from local government. We show that local government can and do have a significant impact on both energy production and energy consumption and are important participants for the implementation of distributed generation (DG). the progress being made by successful local governments can be narrowed to three key factors. First, they have all recognised the co-benefits of a local energy strategy: a reduction in fuel poverty, increased employment, improved quality of life and mitigation of uncertain fuel supplies and prices. Secondly, successful councils have strong political leadership and employee support to implement the structural change to bring about change. Thirdly, leading councils have gained momentum by working in partnership with utilities, private companies, NGO’s, DNO’s and government departments to raise finance and garner support. While climate change remains a global issue, some of the best strategies for mitigation are implemented at the local level

The role of distribution network operators in promoting cost-effective distributed generation: Lessons from the United States for Europe

We explore the different competitive mechanisms applied by electric utilities from the USA in promoting cost-effective Distribution Generation (DG) resources and the challenges that they face due to the increase in DG connections. Case studies from California, Oregon, Colorado and New York are discussed. The case studies refer to two kinds of competitive mechanisms: Request for Proposals (RFP) and auctions (Renewable Auction Mechanism). The study proposes an auction design with a focus on the UK context and examines the role of energy regulators in auction mechanisms. We think that the experience described in the four case studies can be replicated by Distribution System Operators (DSOs) in Europe, however unbundling rules established in the EC third package need to be taken into consideration

The promotion of regional integration of electricity markets: lessons for developing countries

This paper focuses on how to promote regional cooperation in electricity. We begin by discussing the theory of international trade cooperation in electricity, with a view to discussing what preconditions might be important in facilitating wide area trading across national borders. We then develop lessons based on the comparison of four case studies. These include three regional developing country power pools – the Southern African Power pool (SAPP), West African Power pool (WAPP) and the Central American Power Market (MER). We contrast these with Northern Europe's Nord Pool. These cases highlight both the potential and difficulty of having cross-jurisdictional power pools. In the light of the theory and evidence we present, we draw key lessons in the areas of: preconditions for trading; necessary institutional arrangements; practicalities of timetabling; reasons to be hopeful about future prospects.The authors acknowledge the financial support of the World Bank and the support and advice of Mike Toman and Jevgenijs Steinbuks. All opinions expressed in the paper are those of the authors alone and should not be taken to represent those of the World Bank or any of its employees

A firm level analysis of outage loss differentials and self-generation: evidence from African business enterprises

This study examines the outage loss differential between firms that engage in backup generation and those that do not. Unmitigated outage losses were estimated to be US$2.01–US$23.92 per kWh for firms engaging in self-generation, and range from US$1.54–US$32.46 per kWh for firms without self-generation. We also find that firms engaging in self-generation would have suffered additional 1–183% outage losses had they not invested in self-generation. On the other hand, firms without self-generation would have reduced their outage losses by around 6–46% if they had engaged in selfgeneration. Further analyses however reveal that, although engagement in selfgeneration reduced outage losses, a firm engaging in self-generation may still suffer a greater unmitigated outage loss relative to a firm without a backup generator. The relative outage losses depend on the relative vulnerability of the operations of the two sets of firms to power interruption, and the relative generating capacity of a selfgenerating firm to its own required electricity loads. Policy reforms that allow firms, whose operations are highly vulnerable to outages, to make a binding contract with utilities in order to get preferential supply are recommended

The role of regulators in promoting the procurement of flexibility services within the electricity distribution system: a survey of seven leading countries

This paper identifies and explores regulatory issues that may have an impact on the use of flexibility services by distribution utilities to solve grid constraints. This can be done by flexible distributed energy resources which can be instructed, for instance, to reduce export generating capacity or increasing consumption. We want to identify how regulation can better support the development of the future distribution utility in its role as neutral market facilitator, enabling more competition in local flexibility markets and optimal use of resources. A set of questionnaires were designed to capture the insights around important aspects of the regulation of flexibility markets (utilities’ network incentives, network tariff structure, market design for flexibility markets, etc.). These were sent to distribution utilities, energy regulators, energy marketplaces, energy associations and relevant experts from seven jurisdictions. The responses suggest a collective interest in the procurement of flexibility services by distribution utilities from distributed energy resources. New regulations, the adaptation of current rules and recent consultations reflect this. However, the amount of progress with and preferences for key regulatory changes differ across jurisdictions.The authors acknowledge the financial support of SSEN via BEIS funded Power Forward Challenge—Pilot Scale Demonstration scheme