Optimal Regulation of Electricity Provision with Rolling and Systemic Blackouts

Catherine Bobtcheff, Philippe De Donder and Salanié, François
Authors registered in the RePEc Author Service: François Salanié

No 19318, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We set up a static model of electricity provision in which delivery to consumers is only imperfectly reliable. Blackouts can be either rolling or systemic; in both cases a price cap has to be imposed on the wholesale market. We characterize optimal allocations and we show that for any given value of the price cap on the wholesale market, one can decentralize these allocations thanks to two types of regulatory instruments: a retail tax, and capacity subsidies. Some properties follow. If demand is affected by multiplicative shocks only, capacity subsidies are exactly financed by the revenues from the retail tax. If moreover the distribution of systemic blackouts is exogenous, a price cap is sufficient, provided it is set at the value of lost load. In all other cases, all instruments are needed, and capacity subsidies need to be differentiated, based on the correlation between available capacity and its social value.

Keywords: Electricity; Renewables; Climate change (search for similar items in EconPapers)
JEL-codes: D24 Q41 Q42 Q48 (search for similar items in EconPapers)
Date: 2024-08
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP19318 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Optimal Regulation of Electricity Provision with Rolling and Systemic Blackouts (2024)
Working Paper: Optimal Regulation of Electricity Provision with Rolling and Systemic Blackouts (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:19318

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19318

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().