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CenSES annual report 2014

RA 3 Economic Analysis

RA3 works in three work packages:

• WP 1 Electricity market design and economic incentives

• WP 2 National policy: Regulation, incentives and

e ciency

• WP 3 Regional economic implications of energy policies

WP 1 is in predominance through workload and output due

to co nancing of objectives with the research project Inter-

mittent Renewables, balancing Power and Electricity market

Design (INTREPED), while WP 2 andWP 3 also bene t from

other nancing, inter alia with Nordstar, and with the Renergi

project Regpol, and a UN and a World Bank activity.

We emphasize in this report current work on transport.

Transport results is important in work package 2, since

domestic transport under nonglobal cooperation is an

emitting sector not subject to much carbon leakage.

Transport also plays an important role in WP 3, with the

regional dimension being important not only in the transport

system but also in other environmental challenges, such as

air quality.

Climate policy, transport and the

environment

Transport is a major share of world energy use (25 to 30

percent), and domestically almost all of this is road transport.

In developed economies, personal mobility dominates: most

of it by car in the daily commute. Transnational transport

is about ve percent of global greenhouse gas emissions,

about half of which is cargo by ship, the other half is passen-

gers by aviation.

In European countries, a major experiment is started, with

Norway in the lead, using the structure of new car taxes to

‘decarbonize’ the future vehicle eet. Eskeland and Yan have

acquired a detailed data set on new vehicles sold in Norway,

to study this process.

Figure 1 below, is an example of the descriptive analysis. First,

as the tax system shifts to strengthen the penalty on CO

gram per vehicle kilometer penalty, the distribution of ve-

hicles sold shifts to the left. Secondly, electric vehicles show

up in signi cant numbers, due not only to the new vehicle

tax formula (feebates, in the international literature jargon),

but also to other privileges such as bus-lanes, free tolls and

ferries, as well as internationally a carbonfobic technology

trend, driven by policies and policy expectations.

Building power plants has traditionally been the domain of

large utilities and electricity companies who built centralized

generation plants often red by coal or gas. However with

the dramatic fall in costs of distributed energy technologies

like solar and wind power, consumers and businesses are

increasingly able to generate their own electricity. But prob-

lems arise when consumers and small businesses, who lack

signi cant technological know-how and nancial resources

need to make investment decisions involving advanced tech-

nological components.

In the research project “Sun and Lemons: Getting over infor-

mation asymmetries in the California solar market,” post doc

Johannes Mauritzen investigates the problem of consumers

being unable to judge the quality of solar panels. In par-

ticular, he analyze the adoption of panels from new Chinese

manufacturers, which tended to be signi cantly cheaper, but

where the quality of the panels was highly uncertain.

Consumers who are unwilling to invest in panels from un-

known Chinese manufacturers could have become a barrier

to entry, leading to higher prices and a slower adoption of

solar panel systems.

In his study, he uses a dataset of more than 100,000 solar

panel installations in California between 2007 and 2014 and

a hierarchical regressionmodel. Mauritzen nds that contractors

who install solar panels were able to increase market share

and likely bring down overall costs by simultaneously

using cheaper Chinese panels while also adopting a leasing

business model. Instead of consumers purchasing the solar

panel systems directly, the contractor owns the system while

the consumer agrees to a long-term contract to pay for the

electricity generated by the panels.

While individual consumers do not have the engineering and

nancial resources to judge the quality of panels, a large

Sun and Lemons:

Getting over information asymmetries in the California solar power market

Figure 1