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Can Technology Save the Day?

Can Technology Save the Day?. Joseph A. Doucet University of Alberta CAMPUT 2005 Québec City May 03, 2005. Technology may be part of the solution … But what is the problem? Costs? Environment? Regulation: part of the problem, or part of the solution? Focus on electricity.

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Can Technology Save the Day?

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  1. Can Technology Save the Day? Joseph A. Doucet University of Alberta CAMPUT 2005 Québec City May 03, 2005 CAMPUT1

  2. Technology may be part of the solution … • But what is the problem? • Costs? • Environment? • Regulation: part of the problem, or part of the solution? • Focus on electricity CAMPUT2

  3. Regulation: a general observations • You never regulate a single player, you regulate the market… and sometimes other markets • Be careful of what you wish for… CAMPUT3

  4. Energy market regulation: a mix of politics, economics and technology • Politicians don’t necessarily understand markets • Economists don’t necessarily understand politics • Consumers don’t necessarily understand technology CAMPUT4

  5. Energy market regulation: historical perspective • “Problem” to be dealt with was cost allocation; Costs were the result of technology • Incentives were not aligned with technological (or other) innovation • Environmental protection was not a significant concern CAMPUT5

  6. Energy market innovations in Canada • High-voltage transmission • CANDU • Oil Sands • Ballard CAMPUT6

  7. Energy market regulation today (electricity) • Much of restructuring has been driven by technology/costs • More competition is some segments • Environmental protection is a significant concern • How does innovation fare? Is this the key question? CAMPUT7

  8. Classic example of innovation in energy regulation: U.S. SO2 market • Trading of allowances introduced market incentives • Allowance prices are “signals” to the market CAMPUT8

  9. http://www.epa.gov/airmarkets/trading/so2market/alprices.html 19/04/05 CAMPUT9

  10. U.S. SO2 market: success! • Environmental objective attained • Costs much lower than anticipated • How? Greater variety of firm solutions than anticipated – “process” innovation CAMPUT10

  11. U.S. SO2 market observations: • Less trading than anticipated • Less “new” technology than anticipated • Is the objective trading, technology, or costs? CAMPUT11

  12. Electricity market restructuring and technological innovation? • Where are the incentives in new regulatory structures? • Where are the environmental/cost issues that need to be addressed? CAMPUT12

  13. Competitive electricity segments • Generation – construction, O&M, fuel • Wholesale – generation, financial markets • Large retail • Where are the incentives? CAMPUT13

  14. Competition is not inconsistent with environmental improvement – U.S. CAAA SO2 market • Difference between • Competitive generation sector • Competition as a driver for technological development • Competition as an instrument to achieve a given environmental objective CAMPUT14

  15. Competitive electricity market challenges • How to make generation/wholesale competition work, while maintaining coordination of transmission • How to make competition work, while attaining environmental objectives • R&D and innovation process within new firm/industry structures • And a few others… CAMPUT15

  16. Competitive electricity markets and innovation • Uncertainty (policy, economic) and incentives for innovation • Uneven regulatory landscape • Capital markets – liquidity, returns CAMPUT16

  17. Competitive electricity markets and the environment – some issues • Siting challenges • Distribution of emissions • GHG emissions • At present, these issues speak to regulatory seams, as much as to technology … CAMPUT17

  18. Competitive electricity markets and the environment – some approaches • Renewal portfolio standards • Information provision – green power • Metering • Where to impose the obligation? • Is the market more or less conducive to innovation? • Again, regulatory seams… CAMPUT18

  19. Conclusions – Will technology save the day? • Technology will be a part of many solutions • Where are the problems? Where is the crisis? • In general the market does better at innovating • Need a balance between regulation and market CAMPUT19

  20. Conclusions – What should regulators do? • Understand the objectives of regulation • Understand the markets and the impacts of regulation – this means incentives CAMPUT20

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