In the third lecture, we will talk about environmental regulation and how it affects participants in the electricity market.
In the practical session, we will continue to learn how to use JuMP to build electricity models. We will incorporate investment and environmental regulation into a model with a richer set of plants. We will also practice ways in which to save and loop over several simulations. We will also review another code that builds a model with transmission.
Slides 5: slides5.pdf
Slides 6: slides6.pdf
Practicum 5: practicum5.ipynb, data_jaere_clustered.csv,data_technology.csv, practicum5_slides.pdf
Practicum 6: practicum6.ipynb, data_leakage.zip, practicum6_slides.pdf
Small assignement: Take Practicum 5 and consider modeling RPS (renewable portfolio standards). Explain how RPS shifts the costs of renewable vs. non-renewable firms. If the goal is to achieve 30% renewable generation, what is the equilibrium price associated with this policy?
Hint: Start by incorporating RPS into the costs of technologies, assuming a target of 30%. Then try different permit prices so that, in equilibrium, the target is met. Recommendation: Do not try to solve everything at once. Instead treat the RPS parameters as inputs to the function.
❗ Save the Jupyter notebook (.ipynb) and the data CSV file in the same folder. For Practicum 6, unzip de data_leakage file. Then, open the Jupyter Notebook to start exploring.
Bushnell, J., Chen, Y., & Zaragoza-Watkins, M. (2014). Downstream regulation of CO2 emissions in California’s electricity sector. Energy Policy, 64, 313–323. https://doi.org/10.1016/j.enpol.2013.08.065
Bushnell, J. B., Holland, S. P., Hughes, J. E., & Knittel, C. R. (2017). Strategic policy choice in state-level regulation: The EPA’s clean power plan. American Economic Journal: Economic Policy, 9(2), 57–90. https://doi.org/10.1257/pol.20150237
Davis, L., & Hausman, C. (2016). Market impacts of a nuclear power plant closure. American Economic Journal: Applied Economics, 8(2), 92–122. https://doi.org/10.1257/app.20140473
Fabra, N., & Reguant, M. (2014). Pass-through of emissions costs in electricity markets. American Economic Review, 104(9). https://doi.org/10.1257/aer.104.9.2872
(*) Fowlie, M., & Reguant, M. (2021). Border Carbon Adjustments When Carbon Intensity Varies Across Producers: Evidence from California. AER Papers & Proceedings, 2021, 111: 401-405. https://www.aeaweb.org/articles?id=10.1257/pandp.20211073 Online Appendix
(*) Ito, K. Gonzales, L. and Reguant, M. (2023). The Investment Effects of Market Integration: Evidence from Renewable Energy Expansion in Chile, with Luis Gonzales and Koichiro Ito, Econometrica, 91(5): 1659-1693. https://onlinelibrary.wiley.com/doi/10.3982/ECTA20769
Kim, H. (2021). Heterogeneous Impacts of Cost Shocks, Strategic Bidding and Pass-Through: Evidence from the New England Electricity Market. American Economic Journal: Microeconomics, 1–42. https://doi.org/10.1257/MIC.20190367