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Master-Thesis Economics, JKU

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1 Master-Thesis Economics, JKU
"Electrical Grid Regulatory Effectiveness with Regards to Electricity Reliability in the EU“ Master-Thesis Economics, JKU Stefan Schmidinger Supervising tutor: Prof. Christine Zulehner Energieinstitut an der JKU Linz, 6.Nov.2012

2 Introduction: Liberalization of Energy Markets
First Directive 96/92/EG of the European Parliament Amendment 2003 Directive 2003/54/EG of the European Parliament Grid access to third parties Regulation about grid tariffs Unbundling Motivation was/is the establishment of competition and prevention/neutralization of natural monopolies

3 Motivation Lots of theoretical evaluation about types of regulation
Almost no empirical evaluation Anna Ter-Martirosyan, Oct. 2003, The Effects of Incentive Regulation on Quality of Service in electricity Markets, working paper

4 Determination of Regulations
No Regulation at all. Rate of Return Regulations: costs (not just the costs which cannot be controlled by the system operator) are totally refunded plus some premium. Costs * (1 + i) Incentive Regulations: Price Cap Regulations which do not provide incentives to invest in the quality (in terms of outage avoidance or minimizing outage duration) of the grid. But provide an incentive to reduce costs. 1 + CPI – x Regulations which also provide an incentive to improve performance. 1 + CPI – x – q i = allowed profit (e.g. weighted average cost of capital); x = efficiency factor ;q = quality penalty

5 Determination of Regulations
Austria 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 No Regulation 1 RoR Incentive Regulation Quality Standards Source: National Reports European Energy Regulators & Frontier-Economics IWET Report 2011

6 Hypothesis: Is there a casual influence of the kind of regulation on the quality/performance of the electrical grid due to different incentives for the system operators? Rate of Return Regulation leads to lower grid outages. Evaluation of regulatory effectiveness!

7 Dependant Variable Dependant Variable:
Minutes lost per year and capita ( ) excluding exceptional events [MinLost] Unbalanced Panel: 19 countries 12 years




11 Explanatory Variable Variablenname Range Einheit Quelle MIN MAX
energy_import_dependence 1 binär National Reports CEER latitude_capital 90 Grad; Sekunden GDP_Capita_t 70 Euro je Einwohner Eurostat pop_density 500 inhabitants/km² el_price_industrie_cent 15 cent/kWh el_price_domestic_consumer_cent 21 hgt_t 7 kKd Entry_Regulation 6 oecd Public_ownership Vertical_integratioon energy_intensity_to/euro 20 to Rohöleinheit pro 1000 Euro el_consumption_capita_mwh 10 mWh Wind_Photo 35 % Zentralwirtschaft strong_wind_days 269 ECA&D project precipitation_days_R10mm 78 Tage consecutive_dry_days 203 cold-spell-duration 88 warm-spell-duration 104 snow-days_5cm 216 Zeit 11 Jahre

12 First Outcomes

13 Confidence intervals 95(90)%

14 First Conclusion 90% proof that Rate of Return leads to less outage than incentive regulation (even with quality standards) In order to evaluate effectiveness of regulation grid tariffs would be necessary. (Which are not!)

15 Danke für Ihr Interesse!
Kontakt: Stefan Schmidinger Energieinstitut an der Johannes Kepler Universität Linz Altenberger Straße 69 4040 Linz AUSTRIA Tel: Fax: 15

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