Ceesa WP4 Market development and public regulation

1. Ceesa WP4Market development and public regulation Frits Møller Andersen Frede Hvelplund Peter Karnøe Niels I. Meyer Poul Erik Morthorst Jesper Munksgaard

2. Special purpose of WP 4 • Within Ceesa purpose of making a scenario for a long run 100% penetration of RW in DK • Present a framework that explicates all the relevant dimensions of market design that must be adressed politically and analytically in order to achive this • The penetration happens over time in a ’process of creative destruction’ when some E-tech’s are phased out and others in

3. Reference case for creative destruction • Danish wind power penetration from 1977-2005 • The mix of policy instruments that facilitated that penetration (i.e. coercive regulation, economic incentives, dynamic approach etc.)

4. Markets as social institutions and not pure and natural • Private law and public law always participate in facilitating economic exchange • Market places – who regulate who can sell what from which stand? • Soviet and China – from plan to market economies • Energy sector liberalization – a re-regulation including the view of ’what appropriate competition regimes looks like’ • Boundaries shapes cost-functions and product legitimacy (cheap labour and FDA approvals – both show often contestations)

5. Markets as social institutions and not pure and natural • the market is here defined as a specific institutional arrangement (consisting of rules and conventions, technical devices, metrological systems, texts, technical, scientific, legal and economic knowledge), • that facilitates economic exchange (the voluntary transfer of property rights) of an economic good by some pricing mechanism. • The economic good must be legitimate in relation to explicated and accepted externalities. • The type and model of competition (substitution) can vary with institutional regulations and market dominance of certain economic actors.

6. Markets as different configurations of value and performance • The regime of value is not ‘pure’ nor ‘best’ but reflects in a complex way the particular price/cost factors that are implicated in the institutional arrangements by which the regime was formatted and politically sanctioned • The Stern-report illustrates this point as it brings attention to externalities back at centre stage for political market design – the ‘biggest market failure’ • Fogh (2007) “RW cannot at present make it on pure market terms”

7. The co-creation of techno-economic regimes and institutional arrangments Political – administrative arenas Pre-1973 Set-up in DK Institutional arrangements – defining and shaping MARKETS 1.Economic Actors (rights & responsabilities) 2.rules, conventions (standards, boundaries), price models and competitive forms 3.economic incentives, coercive regulations 4.National policy goals 5.Monitoring agencies (Energy system, grid etc.) Set up 1976 Set up 1979 Set up 1985 Infrastructures - electric grid Energy production MIX of Energy Technologies in the energy system (inclu- ding import/export) Shaping demand side for types of energy at certain cost, prices and regulation Set up 1990 -Nordpool (price setting) Set up 2006 Supply side actors offer energy and invest in types of energy tech’s Energy users act upon price/ value characteristics Economic exchange Set up 2010 Dynamic approach to regulation Set up 2018