Since the late 1980s, the energy sector in Great Britain has undergone some core changes in its functionality; beginning with the early 1990s privatisation, followed by an increased green ambition, and commencing a transition towards a low-carbon economy. As the British energy sector prepares itself for another major overhaul, it also puts itself at risk for not being sufficiently prepared for the consequences this transition will have on the existing generating capacity, security of supply, and the national electricity market. Upon meeting existing targets, the government of the United Kingdom risks becoming complacent, putting energy regulation to the backseat and focusing on other regulatory tasks, while introducing cuts for thriving renewable and other low-carbon energy generating technologies. The government has implemented a variety of directives, initiatives, and policies that have sometimes been criticised due to their lack of clarity and potential overlap between energy and climate change directives. The government has introduced policies that aim to provide stable short-term solutions. However, a concrete way of resolving the energy trilemma and some of the long-term objectives and more importantly ways of achieving them are yet to be developed. This work builds on analysing each low-carbon technology individually by assessing its past and current state in the British energy mix. By accounting for the changes and progress the technology underwent in its journey towards becoming a part of the energy capacity in Great Britain, its impact on the future wholesale electricity prices is studied. Research covered in this thesis presents an assessment of the existing and incoming low-carbon technologies in Great Britain and their individual and combined impact on the future of British energy economics by studying their implications for the electricity market. The methodological framework presented here uses a cost-minimisation merit order model to provide useful insights for novel methods of electricity production and conventional thermal energy generation to aid with the aftermath of potential inadequate operational and fiscal flexibility. The thesis covers a variety of scenarios differing in renewable and thermal penetration and examines the impact of interconnection, energy storage, and demand side management on the British wholesale electricity prices. The implications of increasing low-carbon capacity in the British energy mix are examined and compared to similar developments across Europe. The analysis highlights that if the optimistic scenarios in terms of green energy installation are followed, there is sufficient energy supply, which results in renewable resources helping to keep the wholesale price of electricity down. However, if the desired capacity targets are not met, the lack of available supply could result in wholesale prices going up, especially in the case of a natural gas price increase. Although initially costly, the modernisation of the British grid leads to a long-term decrease in wholesale electricity prices and provides a greater degree of security of supply and flexibility for all market participants.

O modelo de comercialização de energia elétrica operante no Brasil é fruto da reestruturação do Setor Elétrico Brasileiro (SEB), que se iniciou na década de 90. Este modelo atual, mais estruturado, impulsionou os investimentos privados no setor nos últimos anos, fazendo com que a comercialização de energia se tornasse algo de grande representatividade dentro do setor elétrico. Este modelo de comercialização como é hoje, dividido em dois ambientes, dinâmico e em constante evolução, é alvo de inúmeros investidores, principalmente no Ambiente de Contratação Livre (ACL) onde o número de agentes cresceu consideravelmente nos últimos anos, e gerou movimentações financeiras recordes. Associado a este crescimento expressivo, os riscos inerentes de mercado também se mostram relevantes e de fundamental necessidade de gerenciamento para o equilíbrio financeiro do investidor. Dessa forma, este trabalho propõe uma análise acerca da comercialização de energia no mercado brasileiro, quanto ao gerenciamento do risco por parte de um agente gerador operando no ACL, através da implementação de um otimizador contratual que ajude na tomada de decisão de quanta energia destinar a cada contrato, de modo a maximizar a receita do agente a um risco controlável. / The present marketing model of electric power in Brazil is the result of the restructuring of the Brazilian Electric Sector (BES), which began in the 90s. This current model, somewhat more structured, stimulated private investment in the sector in recent years; this way the electric power´s market acquired substantial representation within the electricity sector. The current market model, having two different commercial environments, dynamic and constantly evolving, has been attracting many investors, especially in the Free Contracting Environment (FCE) where the number of agents has grown considerably in recent years, and generated record number of financial transactions. Associated with this significant growth, the inherent risks in this market are effectively of concern and need being managed to ensure the financial balance of the investor. Therefore, this work proposes an analysis about the energy trading in the Brazilian market, as to the management of risk by an agent generator operating in the FCE, through the implementation of a contract optimizer that helps in making decisions on how construct a contract portfolio in order to maximizes the agent revenue under a controllable risk.

Abstract The global energy system is undergoing a slow but massive change, initiated by environmental concerns but it is increasingly driven also by the zero-marginal cost of renewable energy. This change includes an increase in the effort to make the electric power system the main transport path for energy in the future. A massive research and development effort has henceforth been put into modernizing the electricity grid towards a so-called Smart Grid, by combining the power grid with communication networks and automation, as well as modernized market systems and structures. This work contributes to this process by introducing two unique models. The first provides a tool for better understanding the impact of combined infrastructure networks with a simple yet complex model of a combined energy, communication and decision model. The second model provides a detailed agent-based environment of an electricity market, supporting various independent entities inside the market, as well as a high time resolution and the often-neglected aspect of coupled market stages. That is, all mis-predictions of the first market stage (day-ahead) have to be settled at the second (balancing) stage. Both models are then used to assess the problem of demand side management, in which the traditional practice of power production being adjusted to the demand is at least partially dropped and flexibility in the demand is used to match the supply – as such technologies are deemed crucial to integrate the unsteady supply from renewable resources, like wind and solar power. We find that complicated scaling effects can be found even in the simplified model, hinting at insufficient consideration of the complexities involved in the real world. We then go to show such unfavorable scaling effects also exist in the current market environment as modeled in our second model. Finally, we show how to circumvent these problems within the current environment as well as introduce a framework to analyze cyber-physical systems and better handle their complexity. / Tiivistelmä Globaali energiajärjestelmä on hitaan, mutta massiivisen muutoksen edessä. Tämän muutostarpeen on käynnistänyt ympäristöämme koskevat huolet, mutta lisääntyvässä määrin tähän vaikuttaa nykyään uusiutuvan energian marginaalikustannusten nollataso. Tähän muutokseen liittyy selkeä sähköverkkojen roolin korostuminen, ja pyrkimyksenä näyttää olevan muutos, jossa sähköverkot siirtävät suurimman osan käyttämästämme energiasta. Tämän seurauksena on käynnistetty merkittäviä tutkimus-ja tuotekehityspanostuksia, joiden tavoitteena on nykyaikaistaa sähköverkot älysähköverkoiksi. Älysähköverkoissa yhdistyvät sähköverkkoon integroidut tietoliikenneverkot ja automaatio sekä modernit sähkömarkkinajärjestelmät ja -rakenteet. Tämä työ tuottaa lisää ymmärrystä uudistumisprosessiin tuottamalla kaksi uutta malliratkaisua. Ensimmäisessä mallissa kehitetään työkalu, jonka avulla pystytään paremmin ymmärtämään toisiinsa yhdistettyjen infrastruktuuriverkkojen toimintaa yksinkertaisella, mutta kompleksisella mallilla, jossa energia- ja tietoliikenneverkot sekä tarvittava päätöksenteko yhdistetään. Toinen malli tuottaa yksityiskohtaisen agenttipohjaisen ympäristön sähkömarkkinasta. Malli tukee erilaisten itsenäisten sähkömarkkinaosapuolten mallintamista korkealla aikaresoluutiolla ja erityisesti usein huomiotta jätettyjen toisiinsa kytkeytyvien eri markkinavaiheiden mallintamista. Malli antaa eväitä vastata kysymykseen, miten ensimmäisessä markkinavaiheessa (vuorokausimarkkina) syntyvä ero tuotannon ja kulutuksen välillä tasapainotetaan toisessa markkinavaiheessa (tasapainotusmarkkina). Kumpaakin luotua mallia hyödynnetään arvioitaessa kulutushallintaa, jossa sähköverkkojen perinteisestä tuotannon ja kulutuksen tasapainosta ainakin osittain luovutaan ja kysyntä- eli kulutusjoustoa käytetään tasaamaan kulutus tuotannon suuruiseksi. Tämänkaltaiset mekanismit ovat oleellisia ja kriittisiä, kun sähköverkkoon liitetään suuria määriä vaihtelevatuottoista uusiutuvaa energiaa, kuten aurinko- ja tuulienergiaa. Tutkimuksessa huomasimme merkittäviä ja monimutkaisia skaalautuvuusilmiöitä, jotka kertovat, että sähköverkkojen tutkimuksessa reaalimaailman kompleksisuuden huomioiminen on ollut riittämätöntä. Sähkömarkkinamallia hyödyntämällä huomasimme vastaavia epätoivottuja skaalausilmiöitä esiintyvän myös nykyisessä sähkömarkkinassa. Erityisesti loimme keinoja, joilla skaalausilmiöistä on mahdollista päästä eroon nykyistä sähkömarkkinarakennetta käytettäessä. Tässä työssä luotuja malleja ja niiden viitekehystä hyödyntämällä pystymme paremmin analysoimaan kyberfysikaalisia järjestelmiä ja hallitsemaan niiden kompleksisuutta.

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<p>In most electricity markets, producers submit supply functions to a procurement uniform-price auction under uncertainty before demand has been realized. In the Supply Function Equilibrium (SFE), every producer commits to the supply function that maximises his expected profit given the bids of competitors. </p><p>The presence of multiple equilibria is a basic weakness of the SFE framework. Essay I shows that with (i) symmetric producers, (ii) perfectly inelastic demand, (iii) a reservation price (price cap), and (iv) capacity constraints that bind with a positive probability, a unique symmetric SFE exists. The equilibrium price reaches the price cap exactly when capacity constraints bind.</p><p>Another weakness is difficulty finding a valid asymmetric SFE with non-decreasing supply functions. Essay II shows that for firms with asymmetric capacity constraints but identical constant marginal costs there exists a unique and valid SFE. Equilibrium supply functions exhibit kinks as well as vertical and horizontal segments. The price at which the capacity constraint of a firm binds is increasing in the firm’s share of market capacity. The capacity constraint of the second largest firm binds when the market price reaches the price cap. Thereafter, the largest firm supplies its remaining capacity with a perfectly elastic segment at the price cap. Essay III presents a numerical algorithm that calculates a similar SFE for asymmetric firms with increasing marginal costs. </p><p>Essay IV derives the SFE of a pay-as-bid auction such as the balancing market for electric power in Britain. A unique SFE always exists if the demand’s hazard rate is monotonically decreasing, as for a Pareto distribution of the second kind. Assuming this probability distribution, the pay-as-bid procurement auction is compared to the SFE of a uniform-price procurement auction. Two theorems in Essay V prove that the demand-weighted average price is (weakly) lower in the pay-as-bid procurement auction. </p>

In most electricity markets, producers submit supply functions to a procurement uniform-price auction under uncertainty before demand has been realized. In the Supply Function Equilibrium (SFE), every producer commits to the supply function that maximises his expected profit given the bids of competitors. The presence of multiple equilibria is a basic weakness of the SFE framework. Essay I shows that with (i) symmetric producers, (ii) perfectly inelastic demand, (iii) a reservation price (price cap), and (iv) capacity constraints that bind with a positive probability, a unique symmetric SFE exists. The equilibrium price reaches the price cap exactly when capacity constraints bind. Another weakness is difficulty finding a valid asymmetric SFE with non-decreasing supply functions. Essay II shows that for firms with asymmetric capacity constraints but identical constant marginal costs there exists a unique and valid SFE. Equilibrium supply functions exhibit kinks as well as vertical and horizontal segments. The price at which the capacity constraint of a firm binds is increasing in the firm’s share of market capacity. The capacity constraint of the second largest firm binds when the market price reaches the price cap. Thereafter, the largest firm supplies its remaining capacity with a perfectly elastic segment at the price cap. Essay III presents a numerical algorithm that calculates a similar SFE for asymmetric firms with increasing marginal costs. Essay IV derives the SFE of a pay-as-bid auction such as the balancing market for electric power in Britain. A unique SFE always exists if the demand’s hazard rate is monotonically decreasing, as for a Pareto distribution of the second kind. Assuming this probability distribution, the pay-as-bid procurement auction is compared to the SFE of a uniform-price procurement auction. Two theorems in Essay V prove that the demand-weighted average price is (weakly) lower in the pay-as-bid procurement auction.

Renewable energy is a current issue in the world as well as in Turkey. Turkey has developing policies in the renewable energy field. Although it is a beneficial mean of obtaining energy, there are barriers on renewable energy production. In order to develop renewable energies, those barriers have to be analyzed and suitable implementations should be developed to overcome them. In this thesis policy and implementation on the renewables are evaluated in general and specially for Turkey. The electricity market is one of the crucial factors of development of the renewable energy. The day-ahead market and renewable energy support mechanism in Turkey are investigated. Finally benefit calculations is carried out in order to compare benefits of renewable energy in market and support mechanisms by using real time price and production values of two renewable energy plants / a hydropower and a wind power plants. Further, outcomes of newly developed prediction project for wind power plants are evaluated in terms of market benefit.

A recent highly disputed subject of regulating energy markets in Europe is the unbundling of vertically integrated down- and upstream firms. While legal unbundling is already implemented in most countries and indisputable in its necessity for approaching regulatory aims, continuative models as ownership unbundling or the alternative of an independent system operator are still ambiguous. Hence, this article contributes to the economic analyses of identifying the differences of separate types of unbundling. Via simulation, we find that legal unbundling brings about the lowest prices in a market under Cournot competition. Moreover, under Bertrand competition, no differences between legal unbundling and ownership unbundling can be identified. (author's abstract) / Series: Working Papers / Research Institute for Regulatory Economics

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Essay I: In January, 2005, the EU launched the first international emissions trading system (EU ETS), aimed at reducing carbon emissions in a cost-effective way by means of a market-based instrument. In this paper, we use the treatment/control, before/after design of the natural experiment approach to investigate the treatment effect of the EU ETS on the profitability of a sample of Swedish energy firms in 2005 and 2006. We also investigate whether under-cap and over-cap firms respond differently to the EU ETS. The estimation results in general suggest no significant impact in 2005 and a negative significant impact in 2006. The sub-sample analysis suggests that profitability of under-cap and over-cap firms were affected differently by the EU ETS in 2005, but not in 2006. Essay II: The paper empirically explores the possible causes behind electricity price jumps in the Nordic electricity market, Nord Pool. A time-series model (a mixed GARCH-EARJI jump model) capturing the common statistical features of electricity prices is used to identify price jumps. By the model, a categorical variable is defined distinguishing no, positive and negative jumps. The causes for the jumps are then explored through the use of ordered probit models in a second stage. The empirical results indicate that the structure of the market plays an important role in whether shocks in the demand and supply for electricity translate into price jumps. Essay III: Scientific evidence indicates that human development faces multiple and interacting regime-switching environmental thresholds such as climate change, ocean acidification and biodiversity loss. And crossing one or more such thresholds would trigger rapid and large changes in our life-support system with widespread consequences. This paper attempts to study the effects of such thresholds on human well-being in a growth theoretical framework. We derive the accounting prices of pollution stocks such as the concentration of greenhouse gases for the risk of triggering catastrophic events, which are needed for conducting a dynamic cost-benefit analysis. We first analyze a simple model with a single threshold and then extend it to a planar system with correlated double thresholds with a joint probability distribution. the results can be applied for analyzing global climate change and ocean acidification risks, which are highlighted in a Nature article by Rockström et al. (2009). Essay IV: Lump-sum transfers as a means of tackling climate change are mainly perceived as a theoretical construct to achieve the first best Pareto optimum. The previous literature on lump-sum transfers normally focuses on the two polar cases: the absence of lump-sum transfers and perfect or unconstrained lump-sum transfers, leaving the middle way aside. In this paper, we attempt to explore the unmarked part by developing a model where transfer costs are explicitly taken into account. We show that whether the Pareto optimum characterized by the equalization of marginal abatement costs is attainable depends on the formation of transfer costs. When the marginal transfer cost is zero, the separability of equity and efficiency under perfect lump-sum transfers is kept. However, when the marginal transfer cost is positive, the optimum with equalization of marginal abatement costs is neither attainable, nor desirable. We also simulate a policy experiment in China to review the optimal abatement and transfer patterns between China's provinces within a framework of imperfect lump-sum transfers. The highlighted welfare gains is supportive of considering lump-sum transfers as a national climate change policy.