Policy Briefs

#18 Pivotal Questions for the Market Design of a Hydrogen Market

Johannes Giehl and Maike Kalz

The development of a hydrogen economy is a crucial element of the energy transition towards climate neutrality. A key aspect of the hydrogen economy is a suitable market design. However, the discussion of the implementation of the hydrogen market lacks the consideration of the aspired final market state. This brief will explore the crucial elements of the market and raise seven pivotal questions that serve as cornerstones for further discussions.

#17 Conclusions on Integrated Network Planning in Europe – the STEERS Project

Christine Brandstätt, Manuel Llorca, Alexandra Lüth, Jens Weibezahn, and Tooraj Jamasb

Network planning is central to a future-proof energy system that is viable within the framework of the European Green Deal and suitable for energy systems integration. The new TEN-E regulation underlines this for European energy networks. The STEERS project aimed at aiding the implementation of its goals, i.e., system integration, the energy efficiency first principle, as well as the improvement of transparency and openness in the planning of energy networks in the European Union, and specifically in the TYNDP process. In this policy brief, we sum up the main conclusions.

#16 A Brief Economics of EDDIE

Tooraj Jamasb, Emanuele Giovannetti, Manuel Llorca, Daniel Davi-Arderius, and Golnoush Soroush

The appeal of decentralised approaches to structure energy generation, transmission and distribution networks, and consumption to scholars and practitioners has grown in the past 20-30 years. Moreover, in the coming years digitalisation will become a key enabler for the sustainable and efficient management of key areas in our economies including the energy sector. A European, decentralised, and open-source energy data space solution such as the one proposed in the Horizon Europe Innovation Action project EDDIE (European Distributed Data Infrastructure for Energy), fits into this trend. In this policy brief the authors outline their initial views on EDDIE and some economic concepts related to the project’s vision.

#15 The Economics of Nuclear Power

Jens Weibezahn and Björn Steigerwald

The levelized costs of electricity from renewables have decreased by up to 90% in the past decade. During the same period, the cost of nuclear power has increased by more than a third. This led to a domination of renewables in new investments worldwide. Even when factoring in integration costs of renewables and new nuclear technologies, building new nuclear power remains multiple times more expensive than new solar or wind projects. Given the financial, project, and technological risks, the role of nuclear in the energy transition should be questioned.

#14 Spatial Closeness of Population and Economic Growth

Constantin Bürgi and Nisan Gorgulu

We look at the spatial angle of economic growth. Specifically, we assess whether areas where people live closer together experience faster growth. Traditional measures like population density or urbanization are not optimal, as they are affected by large uninhabited areas or capped, respectively. We thus introduce a new measure Spatial Population Concentration (SPC) that captures how many people live on average within a given radius of every person within a geographic area. This measure allows for a more accurate measurement of the population concentration than traditional measures, as it does not share some of their shortcomings. Next, we show for U.S. counties that areas with a high spatial population concentration experience faster growth. We nd that counties with a low value of SPC measure in 1990 experienced substantially lower GDP growth over the next 25 years.

#13 Prosumer Empowerment through Community Power Purchase Agreements: A Market Design for Swarm Grids

Raluca Dumitrescu, Alexandra Lüth, Jens Weibezahn, and Sebastian Groh

In our new paper we investigate a technically and economically viable solution for the co-existence of the national grid—centralized infrastructure—with mostly decentralized, renewable energy infrastructure in Global South countries. At the intersection of these two electrification pathways the question arises if the two approaches can be integrated to the benefit of society by maintaining existing assets. We assume the technical link to be a bidirectional inverter and a battery representing the point of common coupling (PCC) between national grid and currently off-grid systems. We then suggest to apply a cost recovery approach to calculate the economic value of a community power purchase agreement (C-PPA) that allows the community to enter into a trade agreement with the national grid to export at a specified rate.

#12 Alleviating Energy Poverty in Europe: Front-runners and Laggards

Ana Rodriguez-Alvarez, Manuel Llorca, and Tooraj Jamasb

Despite the recognition of affordability as one of the pillars of the sustainable energy transition, according to recent reports from the European Commission, approximately 34 million Europeans were considered as energy poor. In the current spiralling prices of gas and electricity coupled with the impact of COVID-19 on economic activity, unemployment, and households’ disposable income, this social policy issue is likely to gain more prominence in the near future. In this new paper, we propose a new approach to the analysis of energy poverty. Our results show that countries with higher economic development and more egalitarian economies have a lower incidence of energy poverty, while higher energy prices exacerbate the problem. Moreover, social protection aids to households and individuals (in the form of benefits to those affected by issues such as disability, sickness/healthcare or social exclusion) have had a significant effect on reducing energy poverty.

#11 Objective vs. subjective fuel poverty and self-assessed health

Manuel Llorca, Ana Rodriguez-Alvarez, and Tooraj Jamasb

Identification of fuel poverty and its impact on individuals is a growing social issue. Classifying households using subjective measures of fuel poverty yields different results than when objective measures are used. We analyse the influence of several socioeconomic characteristics on self-reported health with a special focus on fuel poverty and find that poor housing conditions, low income, material deprivation and fuel poverty have a negative impact on health.

#10 Diversifier or More? Hedge and Safe Haven Properties of Green Bonds During COVID-19

Muhammad Arif, Muhammad Abubakr Naeem, Saqib Farid, Rabrindra Nepal, and Tooraj Jamasb

Against the backdrop of the COVID-19 pandemic, this study explores the ‘hedging’ and ‘safe-haven’ potential of green bonds for conventional equity, fixed income, commodity, and forex investments. Our results show that the green bond index could serve as a diversifier asset for medium- and long-term equity investors. It can also serve as a hedging and safe haven instrument for currency and commodity investments. Our findings imply that green bonds could play a constructive role in global financial recovery efforts without compromising the low-carbon transition targets as they can also be a source of finance for green energy.

#9 Regulatory Experimentation in Energy: Three Pioneer Countries and Lessons for the Green Transition

Tim Schittekatte, Leonardo Meeus, Tooraj Jamasb, and Manuel Llorca

The green transition represented by EU’s Green Deal relies on disruptive innovation, new technologies, and sustainable solutions to achieve the decarbonisation objectives. It is evident that regulation will play a relevant role in the attainment of those targets. However, regulation cannot focus solely on the cost-efficient use of existing infrastructure and investment in replacement and reinforcement. Regulation also needs to consider innovation, despite that regulation cannot always move as fast as innovation.

Tooraj Jamasb, Manuel Llorca, Leonardo Meeus, and Tim Schittekatte

Innovation is key to the decarbonisation of the energy sector and sustainable development. However, in the post-liberalisation period, regulators have found it difficult to incentivise innovation. This policy brief discusses the reasons for the slow uptake of new technologies in energy networks and proposes remedies to promote research and innovation in the EU energy networks and infrastructure.

Carlo Cambini, Raffaele Congiu, Tooraj Jamasb, Manuel Llorca, and Golnoush Soroush

Energy Systems Integration (ESI) is an emerging paradigm and at the centre of the EU energy debate. ESI poses significant public policy implications, because, by identifying and exploiting the synergies within and between the sectors, ESI aims to increase flexibility in the energy system, maximise integration of renewable energy and distributed generation, and reduce environmental impact.

Alexandra Lüth, Jens Weibezahn, and Jan Martin Zepter

Local electricity markets with peer-to-peer trading have recently been put in the spotlight as one option of empowering the end-user and fostering the use of distributed energy resources. A number of pilot projects have already proven the feasibility of concepts for energy communities that the European Commission has called for in the Clean Energy for All Europeans package. However, policymakers need to look out to reassess these structures to ensure a fair distribution of incentives, profits and burdens when adjusting the current market designs to allow for local electricity markets. We show how certain concepts in their basic structure can lead to distributional effects and create a redistribution of costs at the expenses of the average, less affluent energy consumer.

Golnoush Soroush, Carlo Cambini, Tooraj Jamasb, and Manuel Llorca

It is generally accepted that institutions are important for economic development. In this work, we analyse how the quality of regional institutions impacts the performance of Italian electricity distribution utilities and show that utilities in regions with better government effectiveness, responsiveness towards citizens, control of corruption, and rule of law, also tend to be more cost-efficient. The results suggest that national regulators should take regional institutional diversity into account in incentive regulation and efficiency benchmarking of utilities.

Hung Do, Rabindra Nepal, and Tooraj Jamasb

#3 Incentive Regulation of UK Electricity and Gas Networks

Tooraj Jamasb

#2 Rebound Effect in Energy Consumption

Manuel Llorca and Tooraj Jamasb

Generally speaking, the rebound effect describes a situation in which an energy efficiency improvement leads to a less than proportional reduction in energy consumption. Energy efficiency enhancements implicitly imply reductions in the marginal cost of energy, which can be translated into increases in the demand for certain energy services and consequently to increases in energy demand. This policy brief discusses some recent empirical evidence on the rebound effect and its policy significance. A rebound effect different from zero means that the expected emissions savings might not be achieved. Therefore, policy goals to reach specific levels of emissions through energy efficiency could need to be adjusted accordingly.

#1 Public Acceptance in Sustainable Grid Development – A New Approach

Wenche Tobiasson and Tooraj Jamasb

In the course of the transition from carbon extensive power generation to low carbon technologies, the electricity grid will face technical as well as non-technical challenges. Transmission systems are required to tackle the change from highly flexible, centralized generation technologies to fluctuating, unpredictable and decentralized power generation. The grid often needs to be extended to ensure security of supply. While the benefits of the projects affect the whole system, their social costs are local. This mismatch of costs and benefits is a source of conflict and requires new approaches to grid development.