Research

Research interests:

• environmental economics (regulatory policy, evaluations of environmental policies, commons, pesticides)

• electricity sector (regulation, wholesale markets design, rate design, distributed resources)

• resource economics

• foreign direct investment and corporate taxation

Publications:

"Impact of Imperfect Foresight on the Optimal DER Deployment, Remuneration and Policy" (with Burcin Unel, Yury Dvorkin and Jip Kim)

This paper proposes a framework to optimize policymaking for renewable energy sources. We formulate a tri-level optimization problem where each level represents a different entity: a state regulator, a power utility and a wholesale electricity market. We exploit optimality conditions and develop a modification of the Column-and-Cut Generation algorithm that generates cuts for bilinear terms. We simulate the policy trade-offs based on the ISO New England 8-zone test system.

"Electricity Capacity Markets, by Todd S. Aagaard and Andrew N. Kleit - Book Review"

“Who knows what: information barriers to efficient DER roll-out “ (with Burcin Unel, Yury Dvorkin and Jip Kim)

We study the prevalence and importance of information issues arising in the context of deployment of Distributed Energy Resources (DERs) by reviewing the existing engineering and economic literature on distributed resources, analyzing DER-related regulatory proceedings, and surveying the relevant electricity sector stakeholders for their perception of information relevance and accessibility. Our findings suggest that there are substantial information problems. Some of the problems hinder the efficiency of DER roll-out, warranting new regulation, thereby indicating the role of policymakers for future DER developments.

"Should the World Welcome New Oil Finds" (with Alfons J. Weichenrieder)

The paper derives the conditions for oil windfalls to be welfare-enhancing using a multi-period model with (endogenous) oil phase out.

"Efficiency in Wholesale Electricity Markets: On the Role of Externalities and Subsidies" (with Burcin Unel)

This paper studies the social desirability of the policies that award generation subsidies to non-polluting generators. It also evaluates the capacity market reforms proposed in some U.S. regions aimed at mitigating the effect of those subsidies.

"Do Stringent Environmental Policies Deter FDI? M&A versus Greenfield" (with Alfons J. Weichenrieder) )

The paper examines how environmental stringency affects the location of foreign direct investments differentiating between Greenfields and mergers and acquisitions (M&As). We estimate that raising environmental regulation by a standard deviation almost halves the probability of attracting a dirty investment in the form of a Greenfield, while not changing the probability of an M&A investment.

"Strategic Policymaking for Implementing Renewable Portfolio Standards: A Tri-level Optimization Approach" (with Burcin Unel, Yury Dvorkin and Jip Kim)

This paper proposes a framework to optimize policymaking for renewable energy sources. We formulate a tri-level optimization problem where each level represents a different entity: a state regulator, a power utility and a wholesale electricity market. We exploit optimality conditions and develop a modification of the Column-and-Cut Generation algorithm that generates cuts for bilinear terms. We simulate the policy trade-offs based on the ISO New England 8-zone test system.

"Will You Be There for Me the Whole Time? On the Importance of Obligation Periods in Design of Capacity Markets" (with Burcin Unel)

We argue that the definition of “capacity product” can pick (inefficient) winners and losers and substantially affect generation mix, increasing the costs of transitioning to renewable energy. The paper shows that the length of the capacity product affects market efficiency because of the seasonality in electricity generation and demand.

Current work:

“Still your grandfather's boiler: Estimating the effects of the Clean Air Act’s grandfathering provisions” (with Jack Gregory, Bridget Pals, and Richard L. Revesz)

The paper demonstrates the biases in the behavior of coal boilers and the resulting negative environmental effects induced by vintage-differentiated regulation under Clean Air Act.

"A potential sudden stop of energy imports from Russia: Effects on energy security and economic output in Germany and the EU" (with Eva Berger, Niklas Garnadt, Veronika Grimm, Lars Other, Leonard Salzmann, Monika Schnitzer, Achim Truger, and Volker Wieland)

"Revealing Abatement Costs from Permit Banking Behavior" (with Jeffrey G. Shrader)

The paper shows that for regulations that allow for intertemporal compliance flexibility, the firms reveal their compliance costs through their banking behavior. We derive a structural framework for estimating marginal compliance cost curves and apply our method to the Acid Rain Program permit market and the Corporate Average Fuel Economy compliance credit program.

"Monopolists and the Commons: Trading-off Yield and Disease"

This paper looks at the welfare effects of patent length for new pesticides putting forward the idea that monopoly rights for inputs can help increase welfare in markets plagued by the tragedy of the commons.

“Committed but for how long?” (with Burcin Unel)

Using a model of investment and bidding behavior, we derive efficiency trade-offs associated with shortening the length of a capacity product. We also propose a completely new, welfare-enhancing market design under which generators submit bids consisting of their yearly effective capacity profile and price offer.

"Big Search for FDI Determinants - Bayesian Model Averaging Approach" (with Simone Schultz and Izabela Sobiech Pellegrini)

The empirical analysis of foreign direct investment (FDI) decisions is lacking a widely-accepted theory underlying it, leading researchers to define a large array of models whose specifications work potentially only in relatively constrained frameworks. We aim at deepening the understanding of FDI decisions by performing a comprehensive Bayesian Model Averaging (BMA) study of German outward investment stock, accounting for the heterogeneity of the investments.