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"Electrical Grid Regulatory Effectiveness with Regards to Electricity Reliability in the EU Master-Thesis Economics, JKU Stefan Schmidinger Supervising.

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Presentation on theme: ""Electrical Grid Regulatory Effectiveness with Regards to Electricity Reliability in the EU Master-Thesis Economics, JKU Stefan Schmidinger Supervising."— Presentation transcript:

1 "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 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 Introduction: Liberalization of Energy Markets 2

3 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 Motivation 3

4 4 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 Determination of Regulations

5 5 Austria 9091929394959697989900010203040506070809101112 No Regulation 11111111111000000000000 RoR 00000000000111110000000 Incentive Regulation 00000000000000001111111 Quality Standards 00000000000000000000000 Source: National Reports European Energy Regulators 2005-2011 & Frontier-Economics IWET Report 2011

6 6 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! Hypothesis:

7 7 Dependant Variable: Minutes lost per year and capita (1999-2010) excluding exceptional events [MinLost] Unbalanced Panel: 19 countries 12 years Dependant Variable

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11 Explanatory Variable 11 VariablennameRangeEinheitQuelle MINMAX energy_import_dependence01binärNational Reports CEER latitude_capital090Grad; Sekundenhttp://www.worldcaps.com GDP_Capita_t070Euro je EinwohnerEurostat pop_density0500inhabitants/km²Eurostat el_price_industrie_cent015cent/kWhEurostat el_price_domestic_consumer_cent021cent/kWhEurostat hgt_t07kKd Entry_Regulation06oecd Public_ownership06oecd Vertical_integratioon06oecd energy_intensity_to/euro020to Rohöleinheit pro 1000 EuroEurostat el_consumption_capita_mwh010mWhEurostat Wind_Photo035%Eurostat Zentralwirtschaft01 strong_wind_days0269ECA&D project precipitation_days_R10mm078TageECA&D project consecutive_dry_days0203TageECA&D project cold-spell-duration088TageECA&D project warm-spell-duration0104TageECA&D project snow-days_5cm0216TageECA&D project Zeit011Jahre

12 First Outcomes 12

13 Confidence intervals 95(90)% 13

14 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!) First Conclusion 14

15 Danke für Ihr Interesse! Kontakt: Stefan Schmidinger Energieinstitut an der Johannes Kepler Universität Linz Altenberger Straße 69 4040 Linz AUSTRIA Tel: +43 70 2468 5656 Fax: + 43 70 2468 5651 e-mail: schmidinger@energieinstitut-linz.at 15


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