Time: Tuesday, 17/June/2025: 2:00pm - 3:45pm Session Chair: Chandra Krishnamurthy, Swedish University of Agricultural Sciences |
Location: Auditorium M: Jan Mossin |
The transition of the global energy system from one based on fossil energy to one based on non-fossil, renewable energy is denoted the energy transition. Much attention is focused on systemic scale changes in the research literature, with little focus on both households or even sub-national scales. Correspondingly, much of the economic analysis proceeds using a system-wide simulation/analytical framework, with little diversity in approaches used. Furthermore, the transition is anticipated to take a few decades, with short-term energy-related challenges occurring in the interim. These short-term challenges, if not dealt with appropriately, can not only lead to significant delays in, but also reduce public support for, the energy transition. In this context, the proposed session's main goals are to take a close look at the following four aspects of the energy transition using a wide diversity of approaches: diversity in methods used (stated and revealed preference, along with macro-economic models), in scale of analysis (economy-wide, household, firm-level), and in geographic scope (Sweden, Mexico, and Switzerland). Four specific aspects are considered in the studies included in the session: (i) employment; (ii) reliability and investments; (iii) incentives to manage short-term energy crises; and (iv) investments in grid-scale storage and electricity generation. These four aspects span three different levels of analysis: households, firms, and industry/economy. Thus, the proposed session aims to provide a multi-dimensional view of the energy transition, from the bird's eye macro-economic view, an intermediate level firm-level view, and finally, a much lower-level household-level view.
Electricity markets with speculative storage and stochastic generation and demand
Swedish University of Agricultural Sciences, Sweden
Due to potentially extreme price volatility, the expansion of intermittent renewable generation has raised questions about the viability of wholesale electricity markets. To understand the role of commercially-provided electricity storage in attenuating the volatility of wholesale markets, we build a dynamic competitive equilibrium framework of investment in speculative storage and renewable generation capacity with stochastic demand and supply of electricity. We show that a recursive competitive equilibrium exists, is first best, and features well-behaved supply and demand relationships that are able to generate the rents required for investment in storage and generation capacity. Nonetheless, policymakers face a number of market design challenges. Our comparative static results show how, when there is low investment in storage capacity the market can feature many extreme price events, resulting in high levels of investment in generation capacity used as a form of insurance. In this case, storage and generation act as substitutes and crowd out each other's marginal returns. In markets with higher levels of storage capacity, storage and generation are complements. Our computed simulations suggest storage and generation are substitutes under current capital prices. However, the magnitude of tail prices generating rents to support investment does not `shake' and only `stirs' the price distribution, and prices that support capacity investment are well within current price caps. Imposing electricity price caps to keep prices at current `politically feasible levels' does not affect investment in storage capacity and only slightly reduces returns to generation capacity.
Households’ Willingness to Curtail Electricity Usage During Winter Shortages –– A Field Experiment
Zurich University of Applied Sciences, Switzerland
Russia's war on Ukraine has triggered a global energy crisis, raising concerns over future price shocks and shortages. This study reports on a field experiment examining households’ willingness to reduce heat pump usage in response to high electricity prices during future shortages. In collaboration with a Swiss energy provider, residential customers with heat pumps participated in an incentivized experiment involving weekly price signals. Results showed a 13.7% reduction in heat pump electricity consumption on treated days. Energy savings were 9% during low-price periods and 15% during high-price periods. The findings highlight the potential benefits of price-based policies to complement information campaigns in addressing short-term energy shortages.
The value of lost load in electricity intensive industry – combining and comparing stated and production value approaches
1Umeå university, Sweden; 2Swedish university of agricultural sciences
The value of lost load (VoLL) is a monetary metric quantifying the cost of unsupplied energy (€/kWh) during outages, providing valuable insights for policymakers, utility providers, and industrial stakeholders. Disruptions can lead to production losses, equipment damage, and extended downtime, inflicting significant economic costs. In Sweden, core industrial sectors such as pulp and paper, chemicals, mining, and steel manufacturing, are crucial to the national economy and exemplify high values due to their heavy reliance on electricity. With the rise of renewable energy sources, increasing electricity demand and geopolitical turbulence, ensuring grid reliability while managing costs has become an urgent priority for policymakers. Leveraging a mixed-method approach that integrates and compares survey data with publicly available microeconomic data insights, results show how value-added based measures significantly underestimate the financial impact of power outages. Shorter outages are found disproportionately costly, primarily due to high fixed costs associated with initial disruptions. Businesses report that the effects of a one-hour outage could linger for months, with some unable to fully recover even 12 months after the event. These extended disruptions underscore the enduring consequences of power outages, particularly for electricity-intensive industries. With its dual approach, this paper highlights the limitations of traditional value-added metrics and emphasize a comprehensive approach integrating stated cost data reflecting real-world consequences.