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Since the 1990s, many developing countries have restructured their electric power industry. Policies such as breaking up, commercializing and privatizing utilities, allowing for independent power producers, installing independent regulators, and introducing competitive wholesale markets were meant to improve the industry’s efficiency and service quality. We exploit more than 30 years of data from over 100 countries to investigate the impact of power sector reforms on efficiency (represented by network losses) and access to electricity (represented by connection rates and residential power consumption). Crucially, reforms are likely to be endogenous with respect to sector performance: a crisis in electricity supply might well trigger reform efforts. We deal with endogeneity using reform activity in neighboring countries as an instrument. Our results suggest that reforms strongly and positively impact electricity access. According to our preferred specification, a full reform program would increase connection rates by 20 percentage points and per capita consumption by 62 percent: these are large effects that are stable across a range of robustness checks. Moreover, the effect of improving access is largest in South Asian countries. In contrast to previous studies, we do not find robust evidence to support the theory that reforms reduce network losses.
Despite the importance of evaluating all mitigation options so as to inform policy decisions addressing climate change, a systematic analysis of household-scale interventions to reduce carbon emissions is missing. Here, we address this gap through a state-of-the-art machine-learning assisted meta-analysis to comparatively assess the effectiveness of a range of monetary and behavioral interventions in energy demand of residential buildings. We identify 122 studies and extract 360 effect sizes representing trials on 1.2 million households in 25 countries. We find that all the studied interventions reduce energy consumption of households. Our meta-regression evidences that monetary incentives are on an average more effective than behavioral interventions, but deploying the right combinations of interventions together can increase overall effectiveness. We estimate global cumulative emissions reduction of 8.64 Gt CO2 by 2040, though deploying the most effective packages and interventions could result in greater reduction. While modest, this potential should be viewed in conjunction with the need for de-risking mitigation with energy demand reductions and realizing substantial co-benefits.
Electricity is a peculiar economic good, the most important reason being that it needs to be supplied at the very moment of consumption. As a result, wholesale electricity prices fluctuate widely at hourly or sub-hourly time scales, regularly reaching multiples of their average, and even turn negative. This paper examines whether the demand for electricity responds to such price variations in the very short term. To solve the classical identification problem when estimating a demand curve, we use weather-driven wind energy generation as an instrument. Our robustness checks confirm that wind energy is indeed a strong and valid instrument. Using data from Germany, we estimate that a 1 €/MWh increase in the wholesale electricity price causes the aggregate electricity demand to decline by 67–80 MW or 0.12–0.14%, contradicting the conventional wisdom that electricity demand is highly price-inelastic. These estimates are statistically significant and robust across model specifications, estimators, and sensitivity analyses. At average price and demand, our estimates correspond to a price elasticity of demand of about –0.05. Comparing situations with high and low wind energy (5–95th percentile), we estimate that prices vary by 26 €/MWh, and the corresponding demand response to wholesale electricity prices is about 2 GW, or 2.6% of peak load. Our analysis suggests that the demand response in Germany can be attributed primarily to industrial consumers.
Since September 2021, European natural gas prices are at record-high levels. On average, they have been six to seven times higher than pre-pandemic price levels. While the post-pandemic recovery of global natural gas demand has driven up prices around the world, the most important drivers for European gas prices were Russia's less-than-usual supply since mid-2021 and its invasion of Ukraine in February 2022. Western efforts to abandon Russian gas imports altogether mean that high natural gas prices are likely to stay for longer. While high gas prices may be the new normal, there is uncertainty about the economic reaction to this shock. How do energy-intensive industries react? Do global value chains collapse if intermediate goods produced in Europe become uneconomic because of high energy prices? Our preliminary analysis shows that industry response to has in fact been visible from the very onset of the energy crisis. A closer look at German fertilizer production, which heavily relies on natural gas as fuel and feedstock to produce ammonia as an intermediate product, reveals that increased ammonia imports have allowed domestic fertilizer production to remain remarkably stable.
Europe is in the midst of the most severe energy crisis in a generation, at the core of which is the continuously plummeting supply of Russian natural gas. With alternative supply options being limited, natural gas prices have surged. This paper empirically estimates the response of natural gas demand to the price increase, using data from Germany—the so far largest consumer of Russian natural gas. We identify the crisis response of small and large consumers separately, controlling for temperature, gas-fired power generation, and economic activity. For small consumers, including mostly households, we find a substantial demand reduction of 6% from March onwards—most likely due to political and ethical considerations after the start of Russia’s invasion of Ukraine. For industrial consumers, demand reductions started much earlier in August 2021, when wholesale prices for natural gas started to surge, with an average reduction of 11%. We conclude that voluntary industrial demand response has played a significant role in coping with the energy crisis so far.
Eine Teilung des deutschen Marktgebietes würde die Marktwerte erneuerbarer Energien beeinflussen. Wind und Photovoltaik (PV) im Süden Deutschlands würden an Wert gewinnen, während Erneuerbare im Norden Erlöse einbüßen würden. Bei einer auch zukünftig stärkeren Konzentration von erneuerbaren Energien im Norden bedeutet dies insgesamt einen höheren Förderbedarf für PV – Wind wäre trotz niedriger Marktwerte in den meisten Regionen wirtschaftlich. Wenn eine regionale Steuerung erreicht werden soll, müsste die auszuzahlende Förderung für neue PV-Anlagen anhand des zonenübergreifenden Referenzmarktwertes berechnet werden. Durchschnittliche Börsenstrompreise würden durch eine Gebotszonenteilung im Süden Deutschlands leicht angehoben und im Norden gesenkt, die Effekte auf Endkundenpreise und damit verbundene Anreize zur Standortwahl von Industrieunternehmen sind allerdings als gering einzuschätzen.
The average revenue, or market value, of wind and solar energy tends to fall with increasing market shares, as is now evident across European electricity markets. At the same time, these markets have become more interconnected. In this paper, we empirically study the multiple cross-border effects on the value of renewable energy: on one hand, interconnection is a flexibility resource that allows to export energy when it is locally abundant, benefitting renewables. On the other hand, wind and solar radiation are correlated across space, so neighboring supply adds to the local one to depress domestic prices. We estimate both effects, using spatial panel regression on electricity market data from 2015 to 2023 from 30 European bidding zones. We find that domestic wind and solar value is not only depressed by domestic, but also by neighboring renewables expansion. The better interconnected a market is, the smaller the effect of domestic but the larger the effect of neighboring renewables. While wind value is stabilized by interconnection, solar value is not. If wind market share increases both at home and in neighboring markets by one percentage point, the value factor of wind energy is reduced by just above 1 percentage points. For solar, this number is almost 4 percentage points.