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" Three Essays on Energy Economics "
Preonas, Louis Demetri
Fowlie, Meredith; Borenstein, Severin
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Latin Dissertation
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| Language of Document
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English
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| Record Number
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903659
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TL8cr2190b
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| Main Entry
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Preonas, Louis Demetri
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| Title & Author
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Three Essays on Energy Economics\ Preonas, Louis DemetriFowlie, Meredith; Borenstein, Severin
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| College
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UC Berkeley
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| Date
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2018
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| student score
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2018
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| Abstract
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Electricity powers the modern economy, and the electricity supply chain is notoriously complex. Power plants must develop stable relationships for fuel procurement, as their long-run profitability hinges on securing a cheap, reliable fuel supply. Electric utilities may also lack the incentive to provide a reliable power supply to all potential customers, which could hamper economic productivity. The physical properties of electricity transmission create inherent challenges in providing power to all regions of the grid, while simultaneously incentivizing economically efficient production decisions. In this dissertation, I study three potential market failures in electricity supply: (i) market power in U.S. coal transportation; (ii) under-electrification of India’s rural poor; and (iii) short-run allocative inefficiencies in Indian electricity dispatch. In each case, my findings are of substantial economic importance due the scale of the electric power industry, which is essential to virtually all economic activity. Climate change only raises the stakes, and alleviating electricity market failures has the potential to increase carbon dioxide emissions and further harm the planet.In the first chapter, I investigate how market power in the transportation of coal might impact U.S. climate policies. Economists have widely endorsed pricing CO2 emissions to internalize climate change-related externalities. Doing so would significantly affect coal, which is the most carbon-intensive major energy source. However, U.S. coal markets exhibit an additional distortion, as the railroads that transport coal to power plants can exert market power. This upstream distortion can mute the price signal of a corrective tax, due to changes in markups or incomplete tax pass-through. I provide the first empirical estimates of how coal-by-rail markups respond to changes in coal demand. I find that rail carriers reduce coal markups when downstream power plant demand changes, due to a decrease in the price of natural gas (a competing fuel). I estimate markup changes that vary substantially across coal plants, resulting from a combination of heterogeneous transportation market structure and plant-specific demand shocks. Since low natural gas prices and a CO2 emissions tax similarly disadvantage coal, observed decreases in coal markups imply that pass-through of a federal carbon tax to coal power plants may be heterogeneous and incomplete. This could substantially erode the environmental benefits of a price-based climate policy. My results suggest that decreases in coal markups have increased recent climate damages by
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Fowlie, Meredith; Borenstein, Severin
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UC Berkeley
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