Date of Award
Doctor of Philosophy (PhD)
Jonathan E. Hughes
This thesis is comprised of three distinct chapters. In the first chapter, Gone with the Wind: Consumer Surplus from Renewable Generation, I show how more renewable generation can lead to less competitive behavior from traditional electricity generators. Because wholesale electricity markets are structured as multi-unit uniform price auctions, diverse market participants that own wind turbines and traditional resources (like coal and gas plants) have an incentive to withhold their output from their traditional resources to increase the revenue from their own wind turbines. As a result, these generators internalize the benefits of the low marginal cost, directly reducing consumer benefit. Using data from the Midwestern United States, I show that uncompetitive behavior from diverse market participants reduces consumer surplus by up to 3 billion USD from 2014 to 2016.
The second chapter, Concentration Effects of Heterogenous Standards: Refinery Response to the Clean Air Act Amendments, highlights the economic implications of environmental policies. I show how spatially differentiated environmental policies can create new product markets in which firms can compete. If investment is costly, this policy will segment the product market and allow firms to recover lost profits by competing in a more concentrated market. In the context of the boutique fuel standards associated with the 1990 Clean Air Act Amendments, I find that the refineries most exposed to counties where cleaner, more expensive, fuels were mandated were less likely to exit the market.
The final chapter, Demand Side Emissions Policies, evaluates alternative second-best policies to address the emission externalities associated with the generation of electricity. I first show that there is significant heterogeneity in the marginal external damages per MWh of electricity in the United States. Next, I consider alternative policies to address the heterogeneity in emission externalities and find that demand side policies, such as energy efficiency investments, peak pricing, or demand response, are much less effective than a simple plant specific emission tax. This suggests policy makers interested in addressing emission externalities should focus on policies directed at wholesale generation instead of utility distribution.
Butner, Matthew Ridge, "Electricity Markets and Environmental Policy" (2019). Economics Graduate Theses & Dissertations. 95.