State Renewable Energy Governance: Policy Instruments,Markets, or Citizens

Since the 1990s, state governments in the United States have diversified policy instruments to encourage the electric power industry to deploy renewable sources for electricity generation. This study identifies the trends and variations in renewable energy (RE) policy governance among states and examines the effectiveness of policy instruments in the deployment of RE sources for electricity production. This study explores 18 state legislative, RE‐related regulations, programs, or financial incentives existing between 2001 and 2010 in 48 states in the United States. Renewable energy policies were classified into three types of policy approaches: command‐and‐control, market‐based, and information instruments. Results suggest that authoritative approaches are more likely to be effective in the governmental intervention toward a pre‐existing market, and information instruments and citizen participation became important in the power industry in the 2000s. In addition, it gives us some evidence that federal assistance under the American Recovery and Reinvestment Act of 2009 influenced the overall growth of the renewable electricity industry, in addition to state government–led policy designs.     

Coal and nuclear technologies: creating a false dichotomy for American energy policy

The American electric utility industry is entering a moment of transition. Once viewed as a stable and secure consortium of publicly regulated monopolies that produce and distribute electricity, the industry has weathered market restructuring only to face the ever-present risk of natural disasters, price fluctuations, terrorist attacks, and blackouts. This paper uses five criteria—technical feasibility, cost, negative externalities, reliability, and security—to evaluate the broad portfolio of energy technologies available to American electricity policymakers. Upon close inspection, energy efficiency practices, renewable energy systems, and small-scale distributed generation technologies appear to offer many advantages over large and centralized nuclear and fossil fueled generators. Contrary to the mimetic commentary produced by the media, these three approaches would present policymakers a superior alternative for curbing electricity demand, minimizing the risk of fuel interruptions and shortages, helping improve the fragile transmission network, and reducing environmental harm     

Balancing alternatives and avoiding false dichotomies to make informed U.S. electricity policy

Recent events highlight the importance of electric energy policy and how to meet growing electricity demand. Price spikes, global climate change and other environmental concerns, national security threats, an aging infrastructure, and a restructured industry with mixed results are challenges that policy makers and the industry must address. Given the capital-intensive nature of the industry, investment decisions will determine in large part how successfully these challenges are met. One paper that favors energy efficiency, renewable energy, and small-scale distributed generation is examined in detail to test the proposition that fossil fuel and nuclear power should be part of the mix of new investments. To determine the future electricity resource mix requires having a complete and informed picture of the relative costs and benefits of various technologies. The levels of energy efficiency, renewable resources, and distributed generation can and should be increased, but coal and nuclear generation investments are also likely to be needed.

Turning Up the Heat: The Impact of Electric Utility Competition on K–12 Education Funding in Ohio

Ohio, like many states, is currently-considering deregulation of the retail electric power industry. This issue is made more complex in Ohio because structural change in the delivery of electric power is also likely to have a negative effect on state and local government revenues. This effect occurs because of three main forces: the elimination of differential property tax treatment of utilities relative to general businesses, the likely decrease in state electricity excise tax revenues as a result of falling power prices and administrative difficulty in taxing out of state providers, and the potential for stranded costs to diminish the taxable value of electric generating equipment. This article provides an overview of these issues and a brief analysis of the extent to which these problems will be shared by other states. The article then demonstrates the impact of deregulation-induced tax changes on both state and local school district revenues in Ohio and concludes with a discussion of how the state's ability to insulate local governments from these adverse fiscal effects is made both more imperative and more difficult by a recent Supreme Court Ruling on school funding Finally, the issues discussed in the article are placed in a more general context of the challenges of adjusting tax policy to changing circumstances     

Estimating and forecasting residential electricity demand in Odisha

The growing demand for electricity has put pressure on generation of electricity based on fossil fuel, resulting in emission of carbon dioxide. In order to design policy for demand side management, proper knowledge on determinants of electricity demand as well as prediction of future demand is required. However, study on estimation and forecasting of residential demand in developing countries like India has received less attention. This study is the first attempt to estimate and forecast residential electricity demand in the state of Odisha, which is the pioneer of electricity reform in India. It employs ARDL model to estimate residential electricity demand; while ARIMA, VAR and VEC models are employed to forecast future demand. The results show that income and price of electricity are significant determinants of residential electricity demand. The higher price elasticity compared to income elasticity reveals that price could be used as an effective instrument for demand side management. The forecast results show that VAR has the lowest error, which predicts per capita residential electricity demand to be double by 2030–31. This would help the policy makers to plan for demand side management and electricity generation so as to avoid shortage of electricity supply.     

The U.S. regulatory environment and international trade: Lessons from the electricity sector

Regulation has been frequently blamed for the decline of U.S. international competitiveness. This article examines the alleged link between regulation and trade within the context of electric utility policies implemented since 1970. Under an alternative electricity future in which the regulatory burden is reduced and regulatory inefficiencies are minimized, electricity prices are shown to fall by at least 30%. This reduction in the price of a key factor input is shown to lead to reductions in the prices of U.S. export- and import-competing goods and, ultimately, to a modest reduction in the U.S. trade deficit.     

Privatising electric power in Malaysia and Thailand: politics and infrastructure development policy

Electric power development in Asia until recently has been a monopoly of the state, with the power sector's planning, finance, construction and management being a part of government activity. The surge in demand for power, as well as external pressures, induced Asian governments to allow private sector participation in electric power. The Malaysian and Thailand cases represent different patterns of policy‐making regarding privatisation. In Malaysia, the government divested Tenaga Nacional Berhad in 1992 and awarded independent power producers (IPPs) licences to build and sell electricity to Tenaga for transmission and distribution. The IPPs were awarded without tender to friends of the government and the system has enabled the IPPs to make large profits at Tenaga's expense. In the Thai case, privatisation has been a very slow process as successive governments since 1989 have not had the power to initiate extensive divestment of IPP contracting. Privatisation in Thailand is a very contentious political issue and the employees union of the Electricity Generating Authority of Thailand (Egat) is very powerful. Thus, while Malaysia has had extensive privatisation of the power sector, the system eliminates competition in power supply resulting in a higher price of electricity for consumers. Copyright © 2003 John Wiley & Sons, Ltd.     

Energy demand‐side management: New perspectives for a new era

Over the past decade and a half, state governments have assumed greater responsibility over demand‐side management (DSM) operations. Whereas DSM programs formerly were initiated primarily by utilities or state public utility commissions, they are now becoming increasingly state‐initiated and incentivized through funding mechanisms or efficiency‐level mandates. The supporting literature, however, has yet to respond to these changes and to verify that DSM funding or mandates are effective policy mechanisms. Furthermore, the supporting literature has yet to resolve some of the research design and methodological challenges that traditionally plague DSM evaluations. As states continue to expand their energy and climate policy efforts, and the federal government considers the possibility of national decarbonization policies, of which DSM is a key strategy, the need for empirical research on the effectiveness of DSM programs will grow. This essay describes the current status of DSM efforts in the U.S. and explores how these programs affect electricity operations. The relationship between DSM policy and program efforts and the amount of saved electricity is tested with a methodological approach aimed at minimizing the selection bias that is inherent in the nonexperimental research design. Results confirm that state‐run DSM efforts contribute to electricity savings across the country. Public benefit funds coupled with performance incentives are found to encourage utility participation in DSM programs. Energy efficiency portfolio standards and performance incentives effectively promote electricity savings, but public benefit funds without the support of other DSM policies are not significant drivers of either DSM program participation or total DSM electricity savings. © 2011 by the Association for Public Policy Analysis and Management.     

Pricing in the nuclear power industry: Public or private interest?

This paper tests empirically the Ramsey version of the public-interest theory of regulation by examining the pricing practices in the nuclear power industry, using a 1985 cross-sectional sample of 40 electric utilities. Other researchers have avoided this segment of the industry because of difficulties with nuclear fuel data, or perceived differences in the underlying production function. We show that regulators respond to political influences according to the Stigler-Peltzman version of regulation and that Ramsey pricing cannot be validated, at least for the nuclear segment of the electric power industry.     

Procyclical government spending: a public choice analysis

Procyclical government spending occurs when government expenditures increase at a faster rate than income in an economic upturn but fall at a faster rate in a recession. Voracity effects occur when competition for increased spending proves more effective as national income increases. Public choice theory can be applied to describe the distribution of fiscal power across different tiers of government to shed insight into competition for intergovernmental transfers. Politicians have electoral incentives to press for intergovernmental transfers but they also have electoral incentives to signal their ability to manage the economy. With this mix of incentives, the prediction is that intergovernmental transfers will be procyclical and that sub-central government spending will be more procyclical than central government spending. Public choice analysis of pressure for increased public spending predicts a specific pattern of cyclical government spending. This pattern can be observed when analyzing government expenditures in 20 OECD countries between 1995 and 2006.     

Wholesaling in Electricity: Inching Along

This article discusses the incremental but increasingly assertive efforts by federal policy makers toward encouraging deregulation of the electric utility industry. Focusing on the efforts of the Federal Energy Regulatory Commission (FERC), we conclude that the federal government is involved in a sort of two‐sided experiment. On the one hand, efforts to deregulate the electric power industry attempt to establish a competitive market pose the question: Can government provide rational guidance in the formation of markets in a complex industry? On the other hand, it asks whether the democratic process can permit agencies such as FERC to impose and implement an economically rational design on a self‐interested pubic that is mostly interested in cheap, reliable power. In a sense, FERC is auditioning for a new role for regulatory agencies—as designers and overseers of markets. This is a dramatic shift from the traditional role of “regulator as policeman.” Whether regulators are up to the task remains to be seen.     

Are Green Vehicles Worth the Extra Cost? The Case of Diesel‐Electric Hybrid Technology for Urban Delivery Vehicles

A central question for environmental policy is whether the long‐term benefits of energy‐saving technologies are sufficient to justify their short‐term costs, and if so, whether financial incentives are needed to stimulate adoption. The fiscal effects of incentivizing new technologies, and the revenue effects of using the technology, are also policy relevant, given current fiscal constraints. This study evaluates the economic and fiscal effects of promoting diesel‐electric hybrid technology in urban delivery vehicles, an application supported by U.S. policymakers. An economic model is used to simulate the conditional probability density functions of the net present values (NPVs) of diesel electric hybrids annually from 2012 to 2030. The NPV time paths, which reflect fuel price, environmental, and technology trends, show the expected dates that hybrids become economically viable, and allow an evaluation of the net benefits of hybrid technology as an investment over the entire simulation horizon. The NPV distributions are computed for five stakeholder classes, including transportation firms, parties benefiting from reduced externality damages, state and local governments, and the larger society. The analysis shows that hybrid technology investment does not appear to be justified from a societal perspective at a 7 percent discount rate, but the probability for positive net returns increases substantially at a 3 percent rate.     

Low-Income Issues in Electricity Restructuring

Lower prices. New technologies. More choices. These are benefits that competition through electric industry restructuring was supposed to bring customers. Thus far, results have been disappointing, and harmful to the most vulnerable–low‐income people. Restructuring is no longer under active consideration in any state that has not already enacted it. In several states, restructuring has been reversed. This article focuses on the few states that have retained electric industry restructuring, providing a menu of necessary protections, strategies for putting them into place, and supporting arguments to keep them there. However, low‐income protections are appropriate for anactment in all places because vulnerable low‐income families live in states with both restructured and traditional electricity regulation.     

A Framework for Assessing Incentives in Results-Based Management

Many governmental results-based management systems have not produced the expected positive effects. This article analyzes the reasons for this common disappointment by looking at three components of results-based management—results-specific information, capacities, and incentives—and concludes that incentives are often the least developed. It then synthesizes a simple framework for evaluating the efficacy of results-oriented incentives. To be successful, results-specific incentives must be tailored to fit four program characteristics: timeliness, political environment, clarity of the cause-and-effect chain, and tightness of focus. This framework suggests that some systems put too exclusive an emphasis on budgetary incentives and could be strengthened by emphasizing personnel-system rewards, especially those that look beyond business models.     

Determinants of Business Response to Government Tax Incentives for Privately Financed Termination Benefit Programs

This study examines the industry and organizational factors that determine the likelihood of business response to government tax incentives for privately financed termination benefit programs and the substitution problems confronting government programs that use tax incentives to encourage businesses to provide these benefits to their employees. It concludes that government tax incentives will likely have marginal effects on the private provision of termination benefits, especially in large firms in industries with a strong market presence from government. These programs most likely will get high participation from large firms which already provide these benefits to salaried and hourly workers resulting in high substitution effects. They also are likely to extend benefits to hourly employees in firms that already provide similar benefits to salaried workers. However, these tax incentives are likely to have very limited inducement effects on small and medium-sized firms resulting in low overall target efficiency for these programs.     

Learning from Others: What South Korean Technology Policy Can Teach the U.S.

I have recently traveled to South Korea, where Seoul National University hosted the XXII World Congress of Philosophy, the first time the congress has been hosted in Asia. I was astonished by the pervasive use of many of the latest technological advancements. Among the most impressive changes were environmental. The methods employed in hotels and at the University for minimizing unnecessary consumption of electricity were exemplary. Given the great need America has now for developing its economy, and preferably in a way that does not easily lend itself to outsourcing, South Korea can serve as a model for change implemented through the development and manufacturing of advanced technological tools including high‐speed internet access, which will be the focus of the present paper. Some changes have begun already in some arenas of industry and responsiveness to environmental forces, such as in Toyota's decision to move from making SUV's in its new factory coming to Tupelo, Mississippi, to making only the Prius. But Americans have let the governmental incentives for a number of environmentally preferable products run out, and have not lead the way in the propagation of new renewable energy source technologies. Also, America's common approach to the propagation of technological and business development with the use of tax‐incentives is fundamentally different far less forceful than the South Korean approach I will discuss.     

COUNTERVAILING POWER AND A GOVERNMENT PURCHASING COMMISSION: AN OPPORTUNITY TO PROMOTE INCREASED COMPETITION IN AUSTRALIAN INDUSTRIES.

Abstract: Recent moves by both Labor and Liberal Governments in Australia indicate increased awareness of the possibilities that a centralized government purchasing body may be able to secure economies in purchasing large quantities of a wide range of goods used by government departments, agencies and commissions, and also that such a purchasing authority can be used as an instrument with which to put into effect government policies concerned with supporting a particular industry or geographic area. The argument in this paper elaborates on this theme. It is suggested that a centralized purchasing authority should act, using its countervailing power, to secure cost savings which would not only provide benefits to government departments, but which could also be passed on to the general public. For these savings to be achieved, significant changes would have to occur in the relatively passive system of tendering which characterizes most government purchases. The government purchasing body would need actively to induce some real competition between rival tenderers, if need be playing one bid against the other. A government contract would be awarded only on the condition that the lower price offered the government was, in fact, also passed on to the general public. Thus both the public and the firm would benefit; the public by paying lower prices and the firm by the extra demand likely to be generated for its product, as well as the security of the government contract. Of course, such a purchasing policy could only be followed against firms with significant market power and excess profits. Even if such a policy were followed for a small number of products, the result could be greater efficiency and lower prices for all consumers of these products.     

Reinventing Reforms: How to Improve Program Management Using Performance Measures. Really

This paper looks at the design and use of incentivized performance measures to motivate managerial efficiency and promote greater program effectiveness. It starts off by looking at recent reforms like the Government Performance and Results Act to understand why they were largely unsuccessful in altering the decision‐making process of government agencies. One problem was that performance measures have been both numerous and complicated, thereby making their role in management and oversight difficult. Equally important, no external incentives were attached to program accomplishments. The paper then examines what elements would be needed to build a management system that encourages both more efficient and more effective agency behavior. The goal of performance budgeting is to develop performance measures that display the progress of a program toward its stated objectives. Assessments based on these measures may then call for rewards or punishments. As such, it also may encourage program managers toward improved performance. The paper examines the pitfalls and complexities dealt with by Congress and Office of Management and Budget in the process. For example, a performance system must distinguish between funding program needs, as warranted by sectoral indicators, and management concerns. It must also unambiguously tie incentives to performance measures to motivate agencies, while building in commitment devices for the principals. Incentivized performance measures may not be appropriate in all conditions, but may be helpful for motivating managers and improving program performance in particular circumstances.     

Will the Government Catch the Wind?

The government's Renewable Obligation system aims to supply 10 per cent of UK electricity from renewable sources by 2010. Although the headlines suggest that planning controversies hamper these objectives, by the summer of 2004 enough capacity had been given planning consent to supply 4 per cent of UK electricity from new renewable energy sources. Enough renewable capacity to supply 7 per cent of UK electricity from renewables will probably be operational by 2010. The bulk of this is coming from onshore wind power, especially based in Scotland, and also offshore wind power. The offshore schemes are more expensive and need additional support outside the Renewable Obligation. The Conservatives have promised to bring in planning curbs for onshore wind power. There is pressure for more nuclear power, but this is likely to be impossible to finance without a very large subsidy from the Department of Trade and Industry.