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Author Diaz, G.; Munoz, F.D.; Moreno, R.
Title Equilibrium Analysis of a Tax on Carbon Emissions with Pass-through Restrictions and Side-payment Rules Type
Year 2020 Publication Energy Journal Abbreviated Journal Energy J.
Volume 41 Issue 2 Pages 93-122
Keywords Carbon tax; Equilibrium modeling; Market design
Abstract Chile was the first country in Latin America to impose a tax on carbon-emitting electricity generators. However, the current regulation does not allow firms to include emission charges as costs for the dispatch and pricing of electricity in real time. The regulation also includes side-payment rules to reduce the economic losses of some carbon-emitting generating units. In this paper we develop an equilibrium model with endogenous investments in generation capacity to quantify the long-run economic inefficiencies of an emissions policy with such features in a competitive setting. We benchmark this policy against a standard tax on carbon emissions and a cap-and-trade program. Our results indicate that a carbon tax with such features can, at best, yield some reductions in carbon emissions at a much higher cost than standard emission policies. These findings highlight the critical importance of promoting short-run efficiency by pricing carbon emissions in the spot market in order to incentivize efficient investments in generating capacity in the long run.
Address [Diaz, Gabriel; Moreno, Rodrigo] Univ Chile, Dept Ingn Elect, Tupper 2007, Santiago, Chile, Email: fdmunoz@uai.cl
Corporate Author Thesis
Publisher Int Assoc Energy Economics Place of Publication Editor
Language English Summary Language Original Title
Series Editor Series Title Abbreviated Series Title
Series Volume Series Issue Edition
ISSN 0195-6574 ISBN Medium
Area Expedition Conference
Notes WOS:000517755100005 Approved
Call Number UAI @ eduardo.moreno @ Serial 1117
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Author Munoz, F.D.; Wogrin, S.; Oren, S.S.; Hobbs, B.F.
Title Economic Inefficiencies of Cost-based Electricity Market Designs Type
Year 2018 Publication Energy Journal Abbreviated Journal Energy J.
Volume 39 Issue 3 Pages 51-68
Keywords Electricity market design; market power; equilibrium modeling; opportunity costs
Abstract Some restructured power systems rely on audited cost information instead of competitive bids for the dispatch and pricing of electricity in real time, particularly in hydro systems in Latin America. Audited costs are also substituted for bids in U.S. markets when local market power is demonstrated to be present. Regulators that favor a cost-based design argue that this is more appropriate for systems with a small number of generation firms because it eliminates the possibilities for generators to behave strategically in the spot market, which is a main concern in bid-based markets. We discuss existing results on market power issues in cost- and bid-based designs and present a counterintuitive example, in which forcing spot prices to be equal to marginal costs in a concentrated market can actually yield lower social welfare than under a bid-based market design due to perverse investment incentives. Additionally, we discuss the difficulty of auditing the true opportunity costs of generators in cost- based markets and how this can lead to distorted dispatch schedules and prices, ultimately affecting the long-term economic efficiency of a system. An important example is opportunity costs that diverge from direct fuel costs due to energy or start limits, or other generator constraints. Most of these arise because of physical and financial inflexibilities that become more relevant with increasing shares of variable and unpredictable generation from renewables.
Address [Munoz, Francisco D.] Univ Adolfo Ibanez, Fac Ingn & Ciencias, Santiago, Chile, Email: fdmunoz@uai.cl
Corporate Author Thesis
Publisher Int Assoc Energy Economics Place of Publication Editor
Language English Summary Language Original Title
Series Editor Series Title Abbreviated Series Title
Series Volume Series Issue Edition
ISSN 0195-6574 ISBN Medium
Area Expedition Conference
Notes WOS:000431395500003 Approved
Call Number UAI @ eduardo.moreno @ Serial 851
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Author Munoz, FD.; Suazo-Martinez, C.; Pereira, E.; Moreno, R.
Title Electricity market design for low-carbon and flexible systems: Room for improvement in Chile Type
Year 2021 Publication Energy Policy Abbreviated Journal Energy Policy
Volume 148 Issue B Pages 111997
Keywords Market design; Electricity; Flexibility; Decarbonization
Abstract Chile was the first country that privatized all generation, transmission, and distribution services, and introduced competition in the generation segment. Nearly four decades after its creation, many features of the original electricity market design remain unchanged. In this paper, we provide a brief history of the Chilean electricity market and explain its main limitations going forward. Some of these include the use of a cost-based mechanism for spot transactions based on a merit-order curve, low temporal granularity of spot prices, missing forward markets to settle deviations from day-ahead commitments, inefficient pricing of greenhouse gas emissions due to administrative rules, and a capacity mechanism that does not reflect a clear resource adequacy target. Many of these limitations are also present in other electricity markets in Latin America that, when privatized, mirrored many features of the electricity market design in Chile. Failing to address these limitations will provide distorted incentives for the efficient entry and operation of resources that could impart flexibility to the system, increasing the cost of decarbonizing the power sector.
Address
Corporate Author Thesis
Publisher Place of Publication Editor
Language Summary Language Original Title
Series Editor Series Title Abbreviated Series Title
Series Volume Series Issue Edition
ISSN 0301-4215 ISBN Medium
Area Expedition Conference
Notes WOS:000600550600023 Approved
Call Number UAI @ alexi.delcanto @ WOS:000600550600023 Serial 1284
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