In France, while the Energy Transition for Green Growth legislation remains in draft form due to disagreements between the Senate and the National Assembly, the Senate is debating draft legislation on promoting Growth, Activity and Equal Economic Opportunities (known as the Loi Macron), which the government passed through the Assembly using Constitutional Article 49-3. In the course of this debate seventeen senators have tabled an amendment to regulate the access of big industrial consumers of energy to megawatt hours generated by renewable energy sources. To not use the Energy Transition bill as the vehicle for this initiative is part of a parliamentary strategy, an analysis of which does not fall within the remit of the authors of this blog. However, because yet again the issue of distorting market mechanisms has been raised, economic discussion is warranted.

The European Commission has just published its strategy to strengthen the European Energy Union. Many issues are addressed, in particular proposals to further the integration of European electricity markets. While the objective is obviously very important for Europe’s citizens, the proposed approach, which relies on numerical goals for construction of new electricity transmission infrastructure between Member States, is difficult to implement. This paper advocates a different approach: the focus should be instead on increasing the coordination of the operations of the existing grids.

 

Embroiled with the Greek crisis, European policymakers will soon have to step back and reflect on the broader question of the future of the Eurozone. Before calling for an exit or, on the contrary, for further integration, it is worth pondering over the consequences of each option.

Oversimplifying, one could say that there are two strategies for managing the Eurozone: the current one which builds on the 1992 Maastricht treaty and its Fiscal Compact update in 2012; and a more ambitious federalist alternative. Federalism would be my preferred arrangement, but I am not convinced Europeans are ready to do what it takes to make it work.

In its simplest form, price discrimination is selling the same product at different prices according to the buyers, volumes, locations, dates, payment methods, and so forth. This commercial practice has very bad press, as well as being prohibited under competition law. And yet, it also has qualities of efficiency and fairness that merit consideration. To understand the difference of opinion between economists and lawyers on the subject, let’s take a closer look at the example of the British retail energy market.

On 30 November 2014, German energy giant E.ON surprised most industry observers by announcing that it was spinning off its conventional power generation operations in Europe to focus on networks, renewable energy and consumer services.  The announcement marks the disappearance of a European energy superpower, whose history is tightly linked with that of the liberalisation of the electricity industry in Europe. This post draws a few observations from this announcement.

 

France receives about 14% of its electric power from hydroelectric plants whose outputs vary greatly depending on seasonal precipitation levels. Although there are major differences between countries, on average the percentage is the same in the European Union and the rest of the world. But the significance of this technology extends beyond its production levels. In fact, the flexibility of hydroelectric power plants makes this form of energy a crucial part of the answer to the versatility of intermittent demand and energy sources. Furthermore, after water circulates through turbines to generate electricity it can be put to other good uses downstream of retaining structures. So, in order to gain the most benefit from water resources, there must be an institutional framework whereby operators can take advantage of their equipment's flexible nature as well as meet the needs of other users of water. Currently, in France private operators are running large reservoirs through a concessionary scheme and the government is looking to replace these operators with semi-public companies. Can we expect to see more collective efficacy?   

Aficionados of the French electricity market - including the authors of this blog- have noticed an intriguing silence during the Christmas break: at the time of this writing, the government has not (yet?) published “l’arrêté prime”, which would set a bonus granted to residential demand response operators.  This silence is excellent news for electricity consumers, who will not have to pay for the strategic errors of these operators. This blog post explains this situation, and also presents the economics of demand response in electricity markets, an issue of interest for all electricity consumers, not only French ones.

Aficionados of the French electricity market - including the authors of this blog- have noticed an intriguing silence during the Christmas break: at the time of this writing, the government has not (yet?) published “l’arrêté prime”, which would set a bonus granted to residential demand response operators.  This silence is excellent news for electricity consumers, who will not have to pay for the strategic errors of these operators. This blog post explains this situation, and also presents the economics of demand response in electricity markets, an issue of interest for all electricity consumers, not only French ones.

Jean Tirole has recently received the “Nobel” prize in economics from the hands of the King of Sweden in recognition of his outstanding research, in particular on imperfect competition and the regulation of monopolies.  A large portion of Jean’s work examines the electric power industry.  This blog post summarizes its main contributions.

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