We investigate the impact of consumer search and competition on pricing strategies in Germany's electricity retail. We utilize a unique panel dataset on spatially varying search requests at major online price comparison websites to construct a direct measure of search intensity and combine this information with zip code level data on electricity tariffs between 2011 and 2014. The paper stands out by explaining price dispersion by differing pricing strategies of former incumbents and entrant firms, which are distinct in their attributable shares in informed versus uninformed consumers. Our empirical results suggest causal evidence for an inverted U-shape effect of consumer search intensity on price dispersion in a clearinghouse environment as in Stahl (1989). The dispersion is caused by opposite pricing strategies of incumbents and entrants, with incumbents initially increasing and entrants initially decreasing tariffs as a reaction to more consumer search. We also find an inverted U-shape effect of competition on price dispersion, consistent with theoretical findings by Janssen and Moraga-González (2004). Again, the effect can be explained by opposing pricing strategies of incumbents and entrants. (authors' abstract) / Series: Department of Economics Working Paper Series

In this thesis, a retail market mechanism that provides differentiated reliability services is proposed. The differentiated reliability services beyond the standard level utilize advanced metering infrastructure, automated distribution reconfiguration and distributed generation (DG). The service quality at the standard level is regulated, while high reliability services are offered through a market mechanism. This proposed market mechanism is designed in two different models of managing the distribution networks. The first model assumes that an independent distribution system operator (DSO) as an administrative firm provides operational support for delivery and reliability services in a retail market, while the second model does not have a DSO. Main reliability market participants are distribution utilities, retail electricity providers (REPs), non-utility-owned DG units, and end users. The REPs, as end users’ representatives and aggregators, purchase delivery service with high reliability level and backup power from the utilities and DG units, respectively. The prices for these services are based on bidding by all market participants. Bids are created by each market participant optimizing its objective with respect to its own interests; therefore, the market participant can assess the investment costs and manage its own risk in setting the service charge. Notably, the proposed market mechanism, which is based on knowing customers’ willingness to pay, and preferences for reliability, aims to give long-term investment signals to service providers for planning investments in new technologies at value. In addition, the provision of high reliability services can be considered a means that enables the service providers to improve system resilience. The modified IEEE Roy Billinton Test System Bus 2 is simulated to demonstrate proof-of-concept for the proposed retail market by showing the iii process of settling the service prices and utilities’ expected compensation design. By comparing the settled service prices between the two market models, we show that the service prices are quite similar, but the number of end users obtaining backup power is different.

We analyze the pass-through of cost changes to retail tariffs in the German electricity market over the 2007-2014 period. We find an average pass-through rate of around 60%. This significantly varies with demand factors: while the pass-through rate to baseline tariffs, where firms have greater market power because customers are less willing to switch, is only 50%, it increases to 70% in the competitive segment of the market. Although the pass- through rate of independent firms is significantly higher than that of other firms in the competitive market segment, the extent of supply-side heterogeneity is limited. Thus, the firms' ability to exercise market power and reduce pass-through appears to be constrained by competition and largely determined by demand side factors. Finally, we find that the pass-through rate in the competitive market segment has been approaching unity over the past years, indicating a rise in competitive pressure.

As the introduction of renewable energy sources increase in the power market, the need for effective use of electricity by consumers gains importance. The Swedishpower market is characterized by demand inelasticity. Thus, resulting in a system where supply follows demand. Increased demand response in electricity markets is essential in order to cope with future challenges. Electricity retailers can encourage an increased demand response by offering contracts to their customers such as “Realtime pricing” and “Fixed price with the right to return”. Under these contracts consumers are exposed to the hourly prices of electricity, thus benefitting by shifting the load to hours when the price is low. Electricity retailers benefits theoretically by risk eliminations. The aim of this paper is to quantify the economic consequences of increased demand response, for electricity retailers by offering the two contracts.This is done in two parts; firstly a simulation model of demand response is developed based on spot prices and different levels of price elasticity, secondly the results from the simulations are used in a model for calculations regarding an electricity retailers’ economy. The results show that an electricity retailers’ profit increases with increased demand response, greater response results in greater profits. Using low,medium and high demand response results in a profit increase of 34 %, 38 % and 55 % respectively. / Marknadsbaserade styrmedel i bostadssektorn

The fact that household customers are central in the discussion of future sustainable energy systems compels the Swedish electricity retail companies to provide strategies in order to successfully follow the trends on the electricity market. The purpose of this thesis is to complement the electricity retail companies’ understanding of how they are able to enter a sustainable and close business relationship with these customers. The purpose is fulfilled by the analysis of how relationship concepts impact the development of demand response specifically. The information has been collected through a case study of Smart Customer Gotland, via interviews with people who have great experience from the field and via a survey directed towards the customers. The results indicate that there is a major difference in both of the actors’ visions regarding the relationship. The company desires to enter a position where less support and high customization is available. Customers instead want more personal support because of their lack of knowledge and uncertainty of new systems. To succeed, the companies have to consider the fundamental influencing incentives, economy and comfort, while also maintaining the customers’ trust. The most essential parts of the context specific relationship exchange are product exchange, information exchange, and social exchange. These should be directed towards maintaining and increasing the trust from customers. Focusing the resources earlier used for marketing, on these exchanges to make the current customers more satisfied will open up for using word-of mouth primarily from early adopters. Continued work with these early adopters will also increase companies’ knowledge, which is important for the companies to strategically develop its business towards the market of smart energy solutions.

Cette thèse vise à répondre à trois questions soulevées par la vague de réformes dans les secteurs de l’électricité: est-ce que la libéralisation de la fourniture d’électricité a atteint ses objectifs dans l’Union Européenne ? Comment les producteurs qui utilisent des sources renouvelables et non renouvelables se font concurrence dans le marché libéralisé ? Quel est l’'impact de l’augmentation de la production d’électricité à partir de sources renouvelables sur la congestion du réseau et sur les différences de prix zonaux en Italie ? Le premier chapitre fournit une évaluation à mi-terme de la libéralisation de la fourniture d’électricité en Europe. On propose une théorie complète sur la libéralisation de la fourniture et on teste sa cohérence avec la pratique dans l’Union Européenne. L’analyse met en évidence la persistance d’une structure oligopolistique dans la fourniture, un faible engagement des clients et des asymétries dans le taux et la vitesse de transfert des coûts d’approvisionnement dans les prix des contrats. L’attribution aux enchères des services par défaut et de dernier recours semble la meilleure solution afin de favoriser le développement de la concurrence. Dans le deuxième chapitre, nous étudions les interactions stratégiques entre une technologie de production traditionnelle et une renouvelable caractérisée par une capacité aléatoire. Nous employons une version modifiée du modèle de Dixit sur les investissements stratégiques de dissuasion à l’entrée avec deux configurations pour la concurrence après l’entrée: concurrence à la Cournot dans un jeu en deux étapes et le cadre entreprise dominante-frange concurrentielle dans un jeu en trois étapes. Dans les deux cas, l’analyse suggère que le producteur renouvelable exploite l’ordre de mérite afin de remplacer la production de son rival. Dans le troisième chapitre, nous analysons l’impact de la production d’énergie renouvelable sur la congestion et sur les différences de prix zonaux en Italie. En utilisant une base de données unique, nous estimons deux modèles économétriques sur cinq couples de zones: un modèle logit multinomial pour l’occurrence et la direction de la congestion et un modèle MCO pour la taille des différences de prix. L’analyse montre que dans une région importatrice l’effet de l’augmentation de la production renouvelable locale est de diminuer (augmenter) la probabilité de congestion provoquée par la région limitrophe (causée à la région limitrophe). L’augmentation de la production d’énergie renouvelable semble avoir un impact significatif sur les zones insulaires, en diminuant (augmentant) le niveau des différences positives (négatives) des prix. / The objective of this thesis is to answer to three questions raised by the wave of reform in electricity industries: has retail liberalization achieved its objectives in European Union? How traditional and renewable generators compete in a liberalized market? What is the impact on congestion and zonal price differences of increased production from renewable intermittent sources in Italy? The first chapter provides a mid-term evaluation of liberalization of electricity retailing in Europe. We propose a comprehensive theory on retail liberalization and test its consistency with the practice in European Union. The analysis highlights the presence of an oligopolistic supply structure, a limited level of customer engagement in the market and asymmetries in the rate and speed of cost-pass through. The attribution of the Default/Last Resort service through an auction mechanism seems the best solution to favor the development of competition. In the second chapter we study the strategic interactions between a traditional generation technology and a renewable one characterized by an intermittent availability of capacity. We employ a modified version of the Dixit model for entry deterrence with two post entry competition settings: the Cournot framework in a two stage game and the dominant firm-competitive fringe setting in a three stage game. In both cases, the analysis suggests that the renewable generator exploits the merit order rule to crowd out the production of its rival. In the third chapter we analyze the impact of renewable generation on congestion and zonal price differences in Italy. Using a unique database we estimate two econometric models on five zonal pairings: a multinomial logit model for the occurrence and direction of congestion and an OLS model for the size of paired-price differences. The analysis shows that in an importing region the effect of a larger local renewable supply is to decrease (increase) the probability of congestion in entry (exit). Increasing renewable generation seems to have a significant impact on the islander zones, decreasing (increasing) the level of positive (negative) price differences

A reestruturação do Setor Elétrico Brasileiro introduziu uma nova categoria de clientes no mercado consumidor. Os chamados Clientes Livres, ao contrário dos Clientes Cativos, podem formalizar a aquisição de energia elétrica para atendimento dos requisitos de seu processo produtivo, através de contratos bilaterais, onde os prazos, os preços e os volumes são livremente negociados entre os agentes. A segmentação imposta pelas reformas do setor promoveu a competição na atividade de comercialização, repercutindo em novas responsabilidades para os agentes setoriais, com oportunidades para a busca de resultados financeiros, mas, por outro lado, com riscos associados que requerem adequado gerenciamento. Conseqüentemente, o estabelecimento de contratos neste ambiente evidencia a importância da adoção de estratégias de hedge adequadas para mitigar os riscos de exposição financeira dos Clientes Livres ao Mercado de Curto Prazo. Sob essa perspectiva, o texto aborda a formação de preços contratuais no curto e longo prazos, propõe critérios de risco para aferir as estratégias mais promissoras, de acordo com o perfil do consumidor, de modo a otimizar a obtenção de energia no Ambiente de Contratação Livre, contemplando, também, o efeito da recente possibilidade da comercialização dos excedentes de energia elétrica, como forma de flexibilização contratual para esta categoria de consumidores. / The power sector reforms in Brazil introduced a new sort of consumers in the electricity market. The Free Consumers are able to choose their suppliers and freely negotiate contractual terms. The restructuring process of electricity industry promoted the competition into the retail sales subindustry. It gave new responsibilities to market participants and also potential opportunities to reduce its energy costs. On the other hands, the Free Customers are requested to manage their own risks. It is important therefore the establishment of contracting strategies to hedge against price risks. As consequence, the purpose of this study is to address a methodology to implement short and long-term contract pricing and evaluate the risks associated with its strategies. Moreover, the work identifies the contracting decisions to optimize electricity costs accordingly to customer´s needs. Finally, it is presented a study on contract flexibility where an opportunity could be given to such kind of consumers, making possible to resell part of their electricity contracts.

A reestruturação do Setor Elétrico Brasileiro introduziu uma nova categoria de clientes no mercado consumidor. Os chamados Clientes Livres, ao contrário dos Clientes Cativos, podem formalizar a aquisição de energia elétrica para atendimento dos requisitos de seu processo produtivo, através de contratos bilaterais, onde os prazos, os preços e os volumes são livremente negociados entre os agentes. A segmentação imposta pelas reformas do setor promoveu a competição na atividade de comercialização, repercutindo em novas responsabilidades para os agentes setoriais, com oportunidades para a busca de resultados financeiros, mas, por outro lado, com riscos associados que requerem adequado gerenciamento. Conseqüentemente, o estabelecimento de contratos neste ambiente evidencia a importância da adoção de estratégias de hedge adequadas para mitigar os riscos de exposição financeira dos Clientes Livres ao Mercado de Curto Prazo. Sob essa perspectiva, o texto aborda a formação de preços contratuais no curto e longo prazos, propõe critérios de risco para aferir as estratégias mais promissoras, de acordo com o perfil do consumidor, de modo a otimizar a obtenção de energia no Ambiente de Contratação Livre, contemplando, também, o efeito da recente possibilidade da comercialização dos excedentes de energia elétrica, como forma de flexibilização contratual para esta categoria de consumidores. / The power sector reforms in Brazil introduced a new sort of consumers in the electricity market. The Free Consumers are able to choose their suppliers and freely negotiate contractual terms. The restructuring process of electricity industry promoted the competition into the retail sales subindustry. It gave new responsibilities to market participants and also potential opportunities to reduce its energy costs. On the other hands, the Free Customers are requested to manage their own risks. It is important therefore the establishment of contracting strategies to hedge against price risks. As consequence, the purpose of this study is to address a methodology to implement short and long-term contract pricing and evaluate the risks associated with its strategies. Moreover, the work identifies the contracting decisions to optimize electricity costs accordingly to customer´s needs. Finally, it is presented a study on contract flexibility where an opportunity could be given to such kind of consumers, making possible to resell part of their electricity contracts.

There has been a motivated desire from different power system operators to have more systems embedded in computing and networking due to the great advantages of adding new capabilities that wasn't before possible. These advantages increased the power system’s up-time, performance and reduced its maintenance but opened a world of possible cyber-attacks. In January 2016, the Ukrainian electricity infrastructure suffered the first power outage caused by destructive malware that left hundreds and thousands of end-users without electricity during the Christmas holidays. Malicious malware are starting to cover cyber-physical systems that connect the physical technical equipment with the networked computational resources. One of these resources, which are currently being further developed, involves futuristic procedures for the electrical billing process. This means that data corruption could lead to both economical and physical consequences, leading to a decrease of the public's trust on metering equipments, the overall smart grid concept and the electricity market actors. The Nordic and Swedish electricity market is under transition to the Supplier Centric Model (SCM), a new market model, which facilitates the billing and payment towards the end-users and the interactions between electrical suppliers and Distribution System Operators (DSO). This model uses a centralized data service hub for information exchange that is owned and operated by the Swedish Transmission System Operator (TSO). Vattenfall IT has thus jointly with the department of Electric Power and Energy systems (EPE) at KTH launched this master thesis that focuses on the risks and consequences caused by cyber-attacks in the SCM. An adversary may cause unwanted actions by business process hacking or knowledge-based hacking by analyzing the business processes maps within the SCM One of the aims of the thesis was to identify the business process vulnerabilities and events of the DSO's and supplier’s business processes in the SCM if the system was under attack and when the power system operator was unaware that the presented data was corrupted. The outcome of the thesis will help improve the business process resilience against cyber-attacks thus leading to an increased trust in the SCM from the general public. Different related attack-scenarios (AS) were investigated to provide a generic solution for improvements to all relevant business service actors. The risks and consequences were found, analyzed and used for developing suggestive improvements for the Billing Business Process (BBP). / Det har funnits ett motiverat önskemål från olika elkraftsoperatörer att flera system inbäddas i datoranvändningen och nätverken på grund av de många fördelar och nya förmågor som inte var möjliga förut. Dessa förmågor ökade elkraftsystemens tillgänglighet, prestanda och minskade dess underhåll men öppnade en värld av möjliga cyber-attacker. Den Ukrainska elektriska infrastrukturen upplevde det första strömavbrottet orsakad av destruktiva skadeprogram som lämnade tusentals användare strömlösa under julen 2015. Skadeprogrammen har börjat täcka cyber-fysiska system som kopplar det fysiska tekniska utrustningen med de nätverskopplade beräkningsresurserna. En av dessa resurser, som för närvarande är under utveckling, involverar framtida procedurer åt faktureringsprocessen för elektricitet. Detta betyder att data korruption kan leda till både ekonomiska och fysiska konsekvenser vilket leder till en förminskning av det allmänna förtroendet på mätningsutrustningen, det generella smarta elnätskonceptet och på elmarknadsaktörerna. Den nordiska och svenska elmarknaden är under övergång till Elleverantörs Centriska Modellen (SCM), en ny marknadsmodell som underlättar fakturering och betalningen gentemot användarna och växelverkan mellan elleverantörerna och elnätsföretagen (DSO). Denna modell använder en centraliserad tjänstehubb för informationsutbytet som ägs och drivs av den svenska systemansvariga myndigheten (TSO). Vattenfall IT har således tillsammans med avdelningen Energi och Elkraft (EPE) på KTH lanserat detta examensarbete som fokuserar på riskerna och konsekvenserna orsakade av cyber-attacker i SCM. Motståndaren kan orsaka oönskade handlingar via hackning av affärsprocesserna eller kunskapsbaserat hackning genom att analysera affärsprocesskartorna inom SCM. Ett mål av examensarbetet var att identifiera affärsprocessernas sårbarheter och händelser av en DSO och elleverantörs affärsprocesser i SCM om systemen var under anfall och elkraftsoperatören är ovetande att det presenterade data är korrumperat. Examensarbetets resultat kommer hjälpa att förbättra affärsprocessernas spänstighet mot cyber-attacker vilket kommer leda till ett ökat förtroende på SCM från allmänheten. Olika relaterade cyber-attack scenarion undersöktes för att förse en generisk lösning för förbättringar åt alla relevanta verksamhetsaktörer. Riskerna och konsekvenserna var funna, analyserade och användes för att utveckla förbättringsförslagen åt faktureringsprocessen (BBP).