Economic analysis of the impact of electricity regulation

This report provides summarized information on the objective, models and methods, validation process and results of the exhaustive research work Economic analysis of the impact of electricity regulation. The potential of the econometric tool developed in the study for regulatory analysis is also discussed.

Energy regulation undeniably has a significant impact on prices, income transfers and economic growth. Unfortunately, these effects have not been studied in depth using economic analysis. The objective of this study is to develop and implement three econometric models in order to identify the impact of electricity regulations (1) on the retail price of electricity; (2) on income transfers between producers and consumers; and (3) on economic growth.

In this context, the aim of these models is to assess the impact of the regulation of the electricity sector and the changes introduced in this regulation on the economy throughout the period under consideration.

Following the performance metric approach, both the effects of renewable energy promotion costs and network costs on the retail electricity prices for households and industrial consumers are assessed in the retail price model. In the transfers’ model, the impacts of the retail market liberalisation and the penetration of renewable electricity on consumers and producers’ rents are evaluated through a wholesale market analysis. Finally, the growth model analyses the effect of renewable energy promotion costs and network costs on electricity consumption and economic growth.