Presentation on theme: "Things Cheaper, World Greener, When We Link Electricity Together"— Presentation transcript:
1 Things Cheaper, World Greener, When We Link Electricity Together Kwanruetai Boonyasana Supervisors:Department of Economics Prof. Wojciech CharemzaCorrespondence: Dr. Subir BoseWORLDELECTRICITY CO-OPERATION- electricity prices- CO2 emissionlevels- governmentsubsidiesfor generationDecreaseIncrease- security ofelectricity supply- income fromelectricity export- co-operationbetweencountriesThings Cheaper, World Greener,When We Link Electricity Together34512Original picture from: iStockphoto LPINTRODUCTION:Currently, there is a serious problem with regard to the high price of electricity around the world. There is also the issue of electricity shortage in some countries coexisting with surplus in others. “The Absolute Advantage” (1776) of Adam Smith and “Pareto Principle” (1906) of Vilfredo Pareto both suggest mutual advantages that can arise from efficient import and export of electricity. This study examines whether electricity co-operation (import & export) between countries can help redress the problem of high electricity prices.What action is being taken by governments?4Countries 1 & 2 : import & export electricityCountries 3 & 4 : negotiate co-operationCountry : no import & no exportOther countries : undecidedPOSSIBLE SOLUTION:Energy Information Administration (EIA)reports that growth in world electricity generation has outpaced consumption. This suggests that import and export would be beneficial. Not only prices, but also Carbon Dioxide (CO2) emission levels would decrease from this co-operation.MODEL: Representation of Electricity MarketHistoryProjectionElectricity DemandWe consume resources to produce electricity, but we don’t use it.Electricity InventoryElectricity PriceElectricity SupplyExternal Influences:- Import- Export- Transmission Loss- Government SubsidyGeneration CapacityDeveloped from“Model Representation of a Commodity Market”(Walter C. Lays & Peter K. Pollack, 1984)HYPOTHESIS:This table addresses the hypothesis that import and export produce lower prices (p2, p2) than no import and no export (p3, p3) which is “a Nash Equilibrium” payoff, but is this hypothesis true?METHODOLOGY:This study employs Panel Data Analysis, Ordinary Least Square (OLS) by using 29 OECD countries’ yearly data ( ) from IEA.RESULT:ln (Pit) = α + β1 Cit + β2 Git + β3 Mit + β4 Xit + εitElectricity generation produces lower household and industry prices than import + export, which is opposite from the hypothesis. However, generation subsidies in OECD countries are higher than 10%, hence the real prices of electricity for generation (+ subsidies) are higher than for import + export.Subsidies come from taxes, and taxes come from people’s income. So when governments subsidize, the people pay for electricity indirectly.Subsidies involve Moral Hazard by discouraging efficiency of electricity generators – the result being prices may not decrease in the long run.CONCLUSION:Both import and export countries will gain a benefit from electricityco-operation. Electricity pricesin import countries will decrease,and export countries will gainmore income.FURTHER STUDY:- What impact does electricityco-operation have on CO2emission levels?- What role should government subsidies take inencouraging electricity co-operation?Country BCountry AM & XImport: MExport: Xno M & no Xp2 , p2p4 , p1p2 , p4p3 , p3p1 , p4p5 , p5p1 , p4p5 , p3p4 , p2p4 , p4p4 , p3p3 , p3p3 , p5p3 , p4ElectricityPrice:PConsumption:C(+ Demand)Generation:G(+ Supply)Import:MExport:X(- Supply)M + XHousehold+9.37%- 8.73%-12.28%+7.71%-4.57%Industry+8.84%-8.23%-11.83%+6.57%-5.26%The table shows coefficients (βj) of price function at significant level 1%.P is electricity price and p1< p2 < p3 < p4 < p5When the world prices of electricity decrease,it will help people to have a higher standard of living and also reduce the cost of industry and business.Thank youTHAILANDUSA
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