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Small systems, big targets: power sector reforms and renewable energy development in small electricity systems

Author

Listed:
  • Rabindra Nepal

    (CDU Business School, Charles Darwin University)

  • Lawrence Cram

    (Charles Darwin University)

  • Tooraj Jamasb

    (Durham University Business School)

  • Anupama Sen

    (Oxford Institute for Energy Studies)

Abstract

The dominant focus of much policy attention of late has been on the suitability of electricity market reform carried out under the ‘standard’ or prescriptive approach – the end point of which is market liberalization – for the integration of intermittent renewables. There is now a growing consensus around the argument that traditional energy-only electricity markets where prices are based on system marginal cost cannot function efficiently with both fossil fuels and renewables, potentially resulting in market disruptions and price volatility. Consequently, most policy discussion has focused on finding ways to successfully integrate the two through adopting advanced competitive solutions (such as the use of capacity markets in addition to energy-only markets) in larger systems. We however argue that the effectiveness of competition is limited by the size of the system – i.e., there is a minimum threshold size (and other characteristics such as tropical locations, lack of access, and the prevalence of remote consumers) under which competition will not produce expected outcomes, and require distinctive policy solutions. This paper contributes to the policy discourse by discussing the reform of small electricity systems to integrate renewable energy via the means of three case studies: Nicaragua, El Salvador, and their application to Australia’s Northern Territory. The paper draws some policy lessons that can be considered for other small electricity systems in island economies and territories across Africa, the Caribbean, and the Asia-Pacific, that are pursuing a triad of objectives including electricity sector reform, large-scale renewables development and improving energy access.

Suggested Citation

  • Rabindra Nepal & Lawrence Cram & Tooraj Jamasb & Anupama Sen, 2017. "Small systems, big targets: power sector reforms and renewable energy development in small electricity systems," Working Papers 2017/08, Institut d'Economia de Barcelona (IEB).
  • Handle: RePEc:ieb:wpaper:doc2017-08
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    References listed on IDEAS

    as
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    2. M. Pollitt, 2004. "Electricity reform in Chile. Lessons for developing countries," Competition and Regulation in Network Industries, Intersentia, vol. 5(3), pages 221-263, September.
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    7. Paul Simshauser, 2014. "From First Place to Last: The National Electricity Market's Policy-Induced ‘Energy Market Death Spiral’," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 47(4), pages 540-562, December.
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    11. Rabindra Nepal & Flavio Menezes, 2017. "Regulatory Reforms in Small Energy Systems: Experience from Australia's Northern Territory Electricity Market," Economic Papers, The Economic Society of Australia, vol. 36(3), pages 300-316, September.
    12. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Reforming small electricity systems under political instability: The case of Nepal," Energy Policy, Elsevier, vol. 40(C), pages 242-251.
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    More about this item

    Keywords

    Electricity; reforms; renewables; island economies; territories;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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