Research

Ongoing Research Projects

• “Renewables and Electricity Spot Prices: An incentive-risk trade-off for contract design” (WP, slides)

  Support mechanisms for variable renewable electricity (VRE) projects that expose firms to electricity spot prices pose a trade-off for regulators: they provide incentives for investors to develop more valuable projects, but they increase the risk borne by those investors and induce larger risk premiums. A variety of contracts, often referred to as sliding feed-in premiums, attempt to preserve the former while mitigating the latter. I assess whether and which specific contract designs succeed in doing so by quantifying both risk premiums and incentives provided to firms, in the context of the French power system. This quantification is based on simulations of the power dispatch, which allow us to account for the CO2 emissions displaced by a sample of individual VRE projects and to simulate the revenues of these projects in scenarios involving exogenous shocks to assess the risk they face. Findings show that sliding feed-in premiums both mitigate the risk premiums and provide good incentives as long as they insure against the yearly average of electricity prices, while insuring against average prices over shorter periods distorts incentives to build the most valuable projects. I also find that if VRE subsidies are motivated by the CO2 emissions displaced, rather than having fixed premiums per unit of electricity produced, the premiums should be proportional to electricity spot prices to provide better incentives.

• “Robust Production Insuring Procurement and their Pitfalls”, joint work with Laurent Lamy (WP)

  In a procurement setting involving both moral hazard and ex post risk where the contracting rule depends on realized production, we formalize a concept of robust insurance provision which reduces risk premiums with a prior-free approach. This leads us to analyze procurement where the auction-determined contract depends not only on the contractor’s bid but also on a declaration on his expected production. For any given menu of linear contracts, we characterize the corresponding production-insuring menus and establish a general incentive to overstate expected production. We then analyse the pitfalls associated with false declarations in the lowest-price auction while putting aside moral hazard. We illustrate our analysis through simulations calibrated on a few offshore wind power auctions in France.

• “Unpacking the Distributional Implications of the Energy Crisis: Lessons from the Spanish Electricity Market”, joint work with Natalia Fabra and Mateus Souza

  The surge in gas prices triggered by the war in Ukraine led to an unprecedented increase in electricity wholesale prices, which passed through to electricity retail prices. Regulatory interventions in wholesale and retail markets partly mitigated the impacts on consumers. In the context of the Spanish electricity market, this paper quantifies the distributional implications of the energy crisis and the subsequent market interventions, disentangling the distributional effects between consumers and electricity companies and across consumer groups.

• “Comparing the social benefits from variable renewable energy projects”

• “Renewable electricity support in Europe: the trade-off between risk and incentives under sliding premium schemes”, joint work with Laurent Lamy