Water and Energy
Paper Session
Saturday, Jan. 7, 2017 5:30 PM – 7:15 PM
Hyatt Regency Chicago, Wrigley
- Chair: Adrienne Ohler, Illinois State University
Floods and Droughts: Eliciting Customer Willingness-to-Pay and Adverse Event Likelihood Priors for Public Utility Pricing and Infrastructure Decisions
Abstract
This paper describes the development and implementation of a method to elicitpublic preferences for improved water and wastewater management, specifically
examining the relative desirability of engineering versus green infrastructure
approaches to having more reliable water supplies and to mitigating the likelihood of
rainfall-caused flooding events. The case study uses data from Canada collected in
2016. Data collected include respondent estimates of the prior likelihood of events,
as well as data on self-protection measures. Using a choice modeling approach, the
paper estimates household willingness-to-pay values for avoiding both unreliable
water supplies and rain-based urban flooding. Choice attributes include reductions in
the likelihood of adverse events, as well as type of infrastructure used to obtain the
benefits, as well as increases in household water bills. Novel components include the
use of respondent-specific status quo levels of likelihood priors, as well as data
collected about beliefs that public officials will take their preferences into account and
the certainty the respondent expresses about his/her choice. Results indicate a great
deal of heterogeneity about prior beliefs on the likelihood of adverse events and that
green infrastructure elicits a higher willingness-to-pay.
Emissions Allocation Design to Avoid Leakage Under the Clean Power Plan
Abstract
This paper uses simulation modeling to illustrate the environmental and electricity market effects of various approaches to using updating output-based allocation of emissions allowances to overcome leakage of generation and emissions to new sources under a mass based approach to implementation of the Clean Power Plan that focuses on existing generators only. In many emissions cap and trade programs, emissions allowances are allocated based on past behavior (grandfathering) and that approach provides no incentives for specific behavior going forward. In contrast, updating allocation distributes the emissions asset value based on current or recent behavior and updates that allocation over time thereby providing an incentive to do more of that behavior. If the behavior is electricity generation (output), then eligible entities receive a share of the allocation based on their share of electricity generation. Because this allocation is updated over time, entities have an incentive to grow their generation in order to secure a larger portion of the allowance pool. Allowances may be allocated using multiple approaches applied to portions of the total allowance pool as envisioned in the proposed federal plan and model rule. Important aspects of the allocation decision are the determination of which entities are eligible to receive this production incentive, how many allowances will be distributed this way and if allocation rates (allowances per MWh) will be common for all eligible entities or differentiated by technology.Abnormal Returns in Markets for Congestion Revenue Rights
Abstract
In organized energy markets that use locational pricing, power generators and energy suppliers use Financial Transmission Rights (FTRs) to hedge against grid congestion charges, while third party speculators attempt to capture a return with these contracts. FTRs are defined between two locations on the power transmission grid, known as a path. These financial instruments accrue their value based on the energy price differential at two ends of a path. Having the only organized energy market in the Western Interconnection, California has also implemented a version of FTRs, officially known as Congestion Revenue Rights (CRRs). This paper investigates the performance of the CRR markets by estimating and analyzing the presence of abnormal returns among these financial instruments. Our analysis identifies the paths with abnormal CRR returns with the majority of them being positive.Discussant(s)
Diane P. Dupont
, Brock University
Jeffrey P. Cohen
, University of Connecticut
Tatyana Deryugina
, University of Illinois-Urbana-Champaign
Joseph A. Cullen
, Washington University-St. Louis
JEL Classifications
- Q2 - Renewable Resources and Conservation
- Q5 - Environmental Economics