Abstracts

Thursday, September 28

1. Market and energy policies in the long term

Grand visions and pragmatic integration: Exploring historical continuities in European electricity system transitions Ronan Bolton, Science, Technology and Innovation Studies, University of Edinburgh Vincent Lagendijk, Faculty of Arts and Social Sciences, Maastricht University Antti Silvast, Science, Technology and Innovation Studies, University of Edinburgh

In this paper we examine the evolution of the European electricity market, from its historical origins to its role in delivering the energy transition. We emphasise continuities between the pre- and post- liberalisation eras and discuss potential discontinuities and tensions between the current market-based system and decarbonisation. Following a period when radically different visions of what a European system could be were proposed, the nation-state emerged as the key site of system building and constituted the core of the technological and institutional configuration, with integration being pursued in an incremental and pragmatic way. However, a “grand vision” that the pursuit of technical efficiencies should not be constrained by territorial borders persisted and this led to the creation of various forms of transnational collaboration and coordination, most recently with efforts to create an Internal Energy Market. We discuss whether this inherited technical and institutional configuration is compatible with contemporary processes of low carbon transition.

The German energy transition at crossroads – A critical review of where we are Bastian Hoffmann, Andreas Koch, Jan Eberbach, Pauline Raux-Defossez, European Institute for Energy Research (EIFER)

In the presentation, the German energy transition is critically reviewed. The energy transition follows political targets in terms of renewable deployment, CO2 emission reductions and primary energy savings that were defined in the government’s energy concept in 2010 and (partly) revised later on. Clearly, the focus was (so far) mostly on the power sector, resulting in a substantial development of renewable power installations, particularly wind onshore and photovoltaics. On the one hand, the development challenges both market players and the power system: utilities face difficulties with regard to their traditional business models, the electric network experiences bottlenecks which need to be solved by system security measures. The government reacts to these challenges by adjusting the market design and incentive schemes whilst trying to limit the costs for final consumers. On the other hand, the energy transition creates also room for innovation which is transferred into interesting business opportunities in the field of decentralized generation and energy services. On local level, municipal energy suppliers (“Stadtwerke”) are more and more affected by the energy transition which adds also pressure on municipalities due to their strong financial links. The future success of the energy transition depends on several factors including achievement of CO2 targets, limitation and (fair) allocation of costs, security of supply, and the involvement and acceptance of the society.

The conflictual reform of the Japanese electricity market Miyuki Tsuchiya, Centre d'études européennes, Sciences Po Paris

While most of the countries launched the liberalization of their electricity market in the 1990's, Japan resisted, which lead to the failure of the openness of its electricity market. The "regulatory capture" and the "nuclear village" of the Japanese energy policy is frequently denounced and partly explain the energy sector incrementalism. They are mainly composed of the LDP (conservative party), the ten regional electrical monopolies, media, academics etc. However, the Fukushima accident in March 2011 underlined market's failures and speed up the liberalization’s process, which surprisingly happened under the LDP government. This paper aims at analyzing the evolution of the Japanese electricity market since its elaboration in the 1950's, and the transitional moment triggered by the Fukushima accident when an institutionalized practice is questioned, and then accepted and integrated by stakeholders. We will thus observe the power balance modification - mainly between industries and bureaucrats- and how this reform was hardly implemented, until 2013.

A consistent future: economic calculation, prices and territorial development at Électricité de France (1946-1965) Guillaume Yon, Centre de Sociologie de l’Innovation-i3. MINES ParisTech, PSL Research University

In this paper, I will examine the problem raised by territorial solidarity for electricity pricing at Électricité de France (EDF) in the 1950s. I will suggest that this situation cannot be read as an opposition between the imperatives of economic efficiency and political positions. Rather, sophisticated pricing formulae were used as a tool for negotiation regarding EDF’s missions, and for the concrete articulation of different requirements to achieve a coherent market organization. Following the nationalization of power generation in 1946, EDF engineers-economists had been asked to provide the new public monopoly with an economic doctrine and corresponding management rules. At first, redistributive issues were completely excluded from the calculation. Building on Pareto’s work, the engineers-economists asserted a clear division between issues of efficacy, which they could solve through the application of marginal cost pricing, and issues of equity that were supposed to be the realm of political decision. Yet, as I will suggest, this distinction did not hold long. The first pricing project, the 1952 tarif jaune, included distribution costs in electricity prices and as a result, prices were much higher in rural areas than in cities. But a few years later, when the pricing policy was revised in 1956, representatives of rural municipalities managed to impose the idea that territorial solidarity ought to be one of EDF’s missions. Interestingly, EDF engineers-economists endorsed this idea which, they thought, would not contradict the rationale of the marginalist theory. Indeed, marginal costs are oriented towards the future; it is thus possible to set prices in the most remote areas to reflect a level of development (of both the power network and the local economy) that is aimed at. Marginal cost pricing could organize the allocation of resources over time to meet these desired levels of development and thereby be a tool actively contributing to the reconstruction of postwar France and the growth of its economy, as stated in the nationalization project. This did not mean, however, the end of debate, and as the paper will show, negotiations around electricity prices around 1956 focused on the drawing and ranking of pricing zones associated with different development levels of the distribution network. Instead of considering that economic theory seeks only to blindly impose the extension of the market on behalf of the laws of efficiency, without any collective negotiation, a process identified and criticized since Polanyi at least, this case will allow us to argue that economic calculation can be seen as a tool of enquiry and discovery of the different requirements that the organization in the long term of the production of a particular good, here electricity, might be able to fulfill.

2. Clash between electricity market and energy transition

FITs in the European electricity market: the European Union, renewable energy policies, and economic expertise (1980s-2015) Béatrice Cointe, TIK Centre for Technology, Innovation and Culture, University of Oslo

Since the late 1990s, the EU has thus been a driving force in the deployment of renewable energy policies in Member States, and especially feed-in tariffs. I focus on history of feed-in tariffs and the evolutions of their relations with EU policy principles as a way to shed light on the tensions and frictions at play in European electricity policy over the past decades. Relying on the joint analysis of EU policy and associated expertise, of renewable energy policy experiences in Member States, and of contemporary academic literature on renewable energy policy instruments, I approach the European electricity market as a “reflexively designed device and [an] ongoing scale-one experiment” (Callon, 2009:536). By studying the joint production of guiding principles, expertise and policies, I describe the interweaving of theoretical and practical concerns in the evolutions of feed-in tariffs in Europe and explore what it tells of EU policy priorities and debates.

The collision of conflicting socio-technical regimes in the electricity sector. Mapping the breakings of market regime under the pressure of the Renewables regime Dominique FINON, Centre international de recherche sur l’environnement et le développement (CIRED), ENPC & CNRS

There exists a fundamental tension between the market regime of the EU power sectors developed under the successive directives of liberalisation and the planning regime which frames the developement of renewables (RES) capacities. The promotion of RES in these systems is based on mechanisms guaranteeing long-term revenues either by regulated tariffs (FIT) or by fixed price long-term contracts awarded at auctions which are decided by the planner. These arrangements are in total opposition to the market regime, in which the market-price signal is supposed to trigger investment decisions in any technology. The contradictions are materialized by the loss of existing equipment values, the increasing gap between the yearly average market prices and guaranteed tariffs (revenues) for the RES units, the dramatic increase in the additional costs of the RES policy to be paid by consumers (or taxpayers) which could weaken political consensus, and the increasing difficulties in balancing the system. So there are increasing frictions between the two socio-technical regimes, but they are rather different from one country to another one, and so result in various adaptations. The purpose of the paper is to understand the breakings caused by these frictions by comparing the experiences of some contrasting EU countries. The respective policies and their evolution will be analysed as social constructs, by related them to the political and social values, the institutional structures, the industrial structures (including the consolidation of influential new players besides discredited incumbents), and the organization of knowledge expertise for reforming the formal rules. Germany and the UK are chosen in a first stage; Germany, because it is marked by federalism and decentralisation, the nuclear phasing-out accompanied by a long maturation of the RES option, the quasi-religious adhesion to an “all-RES” policy, and the non-conflictual sliding of market rules by negotiation; the United Kingdom, because it is marked by the British centralism which moderates the influence of the decentralized RES proponents, the persisting elites’ adhesion to nuclear option despite its relative failure, a specific combination of market culture tempered by a permanent pragmatism which has leaded to the adoption of a “hybrid” regime which best combines the two regimes covering all the low carbon options (RES as nuclear and CCS). France, Spain or Italy could complete the comparison.

Epistemic politics prevent decarbonization strategies and flexible demand in electricity markets: The clash of heating governance local actors strategies in Denmark

Jens Stissing Jensen and Peter Karnøe, Aalborg University Copenhagen, Department of Planning and Development

The making of heating-cooling into a strategic technical component in the development of tomorrow's flexible energy system is a new ‘normal’ in the Danish energy policy debate. The electricification of heating-cooling can provide the technical basis for flexible consumption and storage, which is seen as important with large-scale use of variable renewable energy sources. However, local actors involved in actual heating sector investments nevertheless find their ability to do forward looking investments prevented by the existing national heat governance arrangements. This paper studies the valuation clash between local strategies to render heating into a flexible, low-carbon component in the future energy system and established national governance arrangements that renders heat into an operable planning object through framed social cost calculations. The existing governance arrangements in the heating area thereby prevent the development of an electricity market where demand has become flexible and price- responsive.

3. How economic expertise is involved in market design, some testimonies from academics Increasing block tariff for electricity Claude Crampes, Toulouse School of Economics

The French law n˚ 2013-312 of April 15, 2013 began by Title 1 "Bonus-Malus on residential energy consumption". It proposed a system of progressive prices for network energy (electricity, natural gas and heating) with a twofold objective: i) to reduce energy consumption by giving consumers a clear price signal regarding higher levels of use, and ii) to provide assistance to the 4 million French households who suffer from energy poverty (i.e. they spend more than 10% of their income on energy). This system has not been applied. Indeed Title 1 was invalidated by the French constitutional court (2013-666 DC) on the grounds that it would have infringed the basic principle of equality among citizens before public obligations. Leaving the legal aspect of progressive tariffs aside, what about their economic rationale? In the electricity industry, they are a good idea only at first sight. As for decreasing total consumption, there is no guarantee that lower demand by big residential consumers paying a high marginal unit price will not be overcompensated by higher consumption from households who benefit from the bonus (low price); see the Ito's analysis of California. Moreover, the system does not address the central problem of savings in the electricity industry. A share of the production equipment is idle most of the time because peak demand must be matched with close-to-1 probability and electricity is not (yet) storable at large scale. Then smoothing the load to save capacity is much more important than decreasing individual consumptions without date specification. Regarding the poverty argument, the prior is that rich households consume more electricity than the poor. This may be true on average but there is a large variance. Indeed, demand for electricity closely depends on the number and quality of the equipment installed at consumption locations and on the insulation of dwellings. Then, unit prices increasing with the consumption level would be regressive for many poor households.

Overall, a system of increasing block tariffs - that have some justifications in the water industry - should not be implemented in the electricity domain. To tackle efficiency concerns, prices should reflect costs (peak load pricing). Income distribution should be the tool for addressing poverty problems. Clearly, there is still a great divide between economic knowledge and political reasoning in the energy field.

4. Articulating renewable energies with electricity market

A European market for “green-ness”? The politics of valuing the environmental quality of electricity. Brieuc Petit, Brice Laurent and Alexandre Mallard, Centre de Sociologie de l’Innovation-i3. MINES ParisTech, PSL Research University The question of the “green” quality of energy (its “green-ness”) is one that marks the present development of electricity markets at the European level. While electricity has become a good that is tradeable all over Europe through interconnected networks and markets, it originates from a diversity of modalities of production, that have contrasted qualities from the point of view of sustainability. How is it possible to follow the circulation of wind, solar or hydro electricity throughout European countries, to meet the consumers desire to buy energy with a low ecological footprint, to comply with European sustainability regulations and, as a whole, to foster the development of renewable electricity? This paper investigates the possibility to answer this question through the valuation of the electricity “green-ness”, by examining European attempts at constructing markets for trading the environmental benefits associated with renewable electricity production. It focuses on diverse initiatives, implemented since the early 1990s, to build and organize markets for “green certificates” that would hold the green value of electricity production. By focusing on the historical evolution of these initiatives and of the associated controversies, it explores the politics of valuing electricity “green-ness” and analyzes the tension between a would- be harmonized European valuation of “green-ness” through tradable immaterial entities, and re- localization processes.

The Energy System of the Future is Smart and Flexible! Competing Danish solutions to the challenge of fluctuating electricity generation Trine Pallesen, Copenhaguen Business School Peter Karnøe, Ålborg University, Denmark Peter Holm Jacobsen, Copenhaguen Business School

Over the past 20 years, the integration of large shares of wind power in the Danish electricity system has been successfully achieved. Yet, the political ambition of further radical increases of fluctuating renewables challenges the stabile operation of the system in the future. Currently, experts and policy makers are debating the possible organization of a system based on 100% renewables and the market design providing the best ‘fit’ for this system. Despite controversies, one thing seems clear: the energy system of the future is smart and flexible. But what smart and flexible means – and how it is achieved – remains controversial. In the paper, we describe two distinct proposals of electricity/energy systems turned smart and flexible, paying particular attention to the markets designed to assist the reorganization of the systems.

Network integration of intermittent energy sources – Curtailment of renewable energies and its impacts Bastian Hoffmann, Andreas Koch, Jan Eberbach, Pauline Raux-Defossez, European Institute for Energy Research (EIFER)

In the past, the development of capacity of intermittent energy sources (IES, mainly PV and wind) has often been planned without taking into consideration the capacity of transmission and distribution networks. IES installations were built in sites with good availability of natural and economic resources, while the ability of the existing network to integrate the IES feed-in was mostly neglected. This approach has led to physical, economic, and social acceptance issues with regard to the network integration of IES. Consequently, more and more IES production is curtailed in order to guarantee safe network operations. Key idea of this presentation is to provide an overview of different curtailment mechanisms currently applied to IES installations in Germany and elsewhere. Observed regulatory instruments will be benchmarked and selected curtailment practices and indicators will be compared quantitatively. Finally, a main controversy about the topic will be highlighted: curtailment as instrument of economically efficient IES network integration vs. wastage of IES energy production in the light of RES targets in final energy consumption.

5. Electricity market and nuclear power

Defying the market: state subsidies for nuclear power in the U.S. Daniel Breslau, Department of Science and Technology in Society, Virginia Tech

Critical theory of neoliberalism has emphasized the ways that market mechanisms short-circuit public decision-making by subordinating public decisions to the logic of the market. Yet the force of market imperatives are not absolute. They are subject to contention, so that the eventual boundaries of market pricing mechanisms and regulated prices are the outcome of political struggle. The wholesale electricity markets in North America, when implemented, were intended to be a comprehensive and apolitical pricing mechanism, and to replace a politicized resource planning process with price signals and private investment decisions. Recent developments suggest that the scope of these markets is likely to be severely limited in the face of new state policies to subsidize specific generating resources, primarily renewables and nuclear. Specifically, individual states have adopted policies to provide Zero-Emissions Credits to nuclear power plants that would otherwise fail due to competition from cheap natural gas and subsidized renewables. Supported by a coalition of environmental interests and the owners of the nuclear plants, these ZECs have provoked legal grievances and a questioning of the role of competitive markets. The paper reviews the recent state policies, the litigation which followed them, and actions by the U.S. Federal Energy Regulatory Commission. The case suggests that the scope of market institutions in determining prices and coordinating investment are likely to be continually limited in the face of a coalition of environmental concerns, utilities, and their investors. In the case of other generating technologies, namely coal, the same coalition did not exist, and these investments were allowed to retire without the benefit of state subsidies.

Limited arrangements with the market: the financing of the life extension of nuclear power in France Thomas Reverdy, Grenoble Institute of Technology, PACTE, Université Grenoble-Alpes Frederic Marty, GREDEG, CNRS

Since its liberalization, nearly 17 years ago, the French electricity sector has been gradually integrated into the European market. A wholesale market sets a price of electricity; whose level is today lower than production costs from nuclear power in France. This low level is due to a combination of factors: the fall of fossil fuels prices, consumption reduction, power overcapacity, supports for renewable energy. The competitiveness of the electrical energy produced by EDF is today strongly exposed to market prices fluctuations and the situation of the company is considered as critical. This communication seeks to understand how the market price exerts its discipline on this sector and limits the room for maneuver available to the French government to implement its policy in the field of nuclear energy. It details the effect of a low price on private and public decisions related to generation unit life extension or to the closing of nuclear power plants. This communication is an original contribution to the sociology of markets, showing an unexpected case of maintenance of a market organization, despite market failures and increasing economic consequences for the State.

6. Consumers, security and safety

The Making Up of the Consumer in the Deregulated Electricity Market Alain Nadaï, Centre international de recherche sur l’environnement et le développement (CIRED), ENPC & CNRS Catherine Grandclément, GRETS (EDF R&D)

This paper is concerned with the coming into being of “the consumer” in the electricity sector as an intricate phenomenon of the liberalization of electricity markets at the European level. Not that there weren’t previously forms of “electricity consumption” and even economized forms of electricity consumption – after all, the use of economy as a means to discipline electricity demand dates back from as early as the first grids. We argue, however, that 1) the consumer is always a made up figure, an effect of a socio-economic configuration or assemblage, and 2) that the liberalization of electricity markets in Europe has given way to a specific kind of consumer, one that is typically described in economics textbooks and that insists on “signals” held to be conducive of consumer behaviour. That specific “consumer” is a relatively new character in the electricity sector and one which is closely associated with the process of market liberalisation. In recent years, a few directives have promoted this specific brand of consumer and the material devices through which he may be enacted. That consumer is a consumer amenable to “information” such as the price of the kilowatt-hour or the amount of kilowatt-hours spent per month. This paper tracks and characterizes the consumer as a character in EU directives and shows how it is operationalized in specific settings, for instance through material devices such as smart meters in France.

Controversial integration of the security of supply in the electricity market: the design of the French capacity market Frederic Marty, GREDEG, CNRS Thomas Reverdy, Grenoble Institute of Technology, PACTE, University of Grenoble-Alps

Formalized by the law in 2010, the French capacity market has been implemented in January 2017. This mechanism, additional to price signals provided by the wholesale markets of electricity, intends to ensure security of supply during the peak demand. Beyond the controversy about the need for this additional mechanism and the choice of its modalities, this delay can be explained by the difficulty of bringing a solution acceptable to the different parties involved in the French electricity market and of ensuring the compatibility of the mechanism with the requirements of the European Commission, in terms of competition policy and energy policy. Crossing economic and sociological perspectives, this communication analyzes the political construction of the French capacity market from 2010 to 2017. It contributes to the knowledge of the political and institutional processes of integrating new political issues in market design. Safety along the Energy Chain Nicolas Boccard, Universitat of Girona

The incidence of accidents in the energy supply chain is extended in two directions, from fossil fuels to wind power and from “severe only” to all kinds of accidents; we include latents victims in the nuclear sector and also account for electricity transmission. Hazard rates (ratio of casualties to energy) are found to differ from previously published figures. Ranking of energy technologies are proposed and contrasted between developed and developing economies. We compute the absolute energy casualties for a variety of countries and the impact per population, accounting for energy imports; the risk rates are shown to be proximate. Lastly, we compare these findings with the negative health impacts of energy consumption such as air pollution and road accidents. For every casualty within the energy supply chain, there is a hundred more casualties among end-users in the advanced countries and a thousand more in the developing ones. These stark differences call for a clear order of priorities to address first the negative externalities of energy production and consumption.