Working Papers

Gone with the Wind: Consumer Surplus from Renewable Generation, Submitted.

  • Electricity generators withhold output when their own wind turbines are generating electricity.
  • (Best Student Paper Award, USAEE)
  • Abstract
    A majority of the electricity in the United States is cleared in a wholesale electricity market that is structured as a multi-unit, uniform price, auction. Over the past ten years there has been a rapid and large increase in the capacity of renewable electricity generation in these wholesale markets, drastically changing how these markets operate. One consensus is that this renewable generation is decreasing the wholesale price of electricity, as these units displace higher cost electricity generating units. Using a supply function equilibrium framework, I show how increased renewable generation can emphasize the economic incentive to withhold capacity, attenuating the impact of renewable generation on the wholesale price. Taking advantage of detailed data on the largest wholesale electricity market in the United States, I provide direct evidence that horizontally integrated firms that own wind turbines and other assets will withhold their other assets when their own wind turbine is generating electricity. As a result, over 30% of wind generation is replacing withheld units suggesting a decrease in potential consumer surplus of 3.3 billion US Dollars from 2014 to 2016.

Isolating the Impacts of the Shale Revolution on the U.S. Energy Mix: Evidence from the Natural Gas Pipeline Network (with Jonathan Scott), Submitted.

  • More natural gas production reduces the share of electricity generated from coal and renewables.
  • Abstract
    This paper estimates the long-run effects of the shale revolution on aggregate US electricity fuel mix using pre-existing pipeline infrastructure as quasi-random exposure to an abundance of natural gas. We find that more natural gas deliveries reduces the amount of electricity generated from both coal plants and wind turbines. Even though the shale revolution has been attributed as a key contributor to reducing greenhouse gas emissions from electricity in the U.S., our counterfactual electricity mix implies the impact on total emissions from the shale revolution are neutral because of the substitution patterns across electricity generation technologies.

Demand Side Emissions Policies

  • Demand side policies are not effective in addressing the heterogeneity in electricity emissions externalities.
  • Abstract
    When implementing a Pigouvian tax to address an externality, a principle is that the effectiveness of the policy is independent on where the tax is implemented. This would suggest that pricing the emissions associated with the generation, transmission, and distribution of electricity would be equally effective where the electricity is produced, or where it is consumed by residential, industrial, or commercial customers. I use hourly data on power plant generation and pollution emissions from 2010 to 2015 to evaluate alternative policies for addressing emission externalities associated with electricity generation. I show that demand side policies, focusing on all generation within a given hour, are extremely ineffective in capturing the total variation in emission externalities. Conversely, the second best supply side policy can capture almost all of variation in emission externalities. This suggests that policies designed to address emission externalities should focus on wholesale markets operations and the generation of electricity, not utility retail pricing or demand response programs.

Concentration Effects of Heterogeneous Standards

  • Environmental policies that create new product markets can make manufacturers more profitable.
  • Abstract
    Environmental regulations can alter the geographic and product markets in which firms compete. This impacts a firm's ability to exercise market power, and profits subsequently. This ability to charge a higher markup-over-cost can counteract the increase in the cost of production associated with the environmental regulation. In the context of the Boutique Fuel Standards resulting from the 1990 Clean Air Act Amendments, I use a latent profit approach to show how refineries that were more exposed to the environmental regulation were less likely to exit the market. This is consistent with a model of spatial Cournot competition in which firms can invest in a technology that allows them to charge a higher mark up.

Works in Progress

  • Market Risk and Investment Incentives (with Cameron Duff)