Essays on the U.S. Electricity Sector

Jin Soo Han, University of Pennsylvania

Abstract

This dissertation consists of two essays on the U.S. electricity sector. The first essay studies the impact of electricity market deregulation on a firm's fuel procurement costs. I find that deregulated coal-fired power plants achieve about 6% cost reduction, half of what literature has claimed. Furthermore, when the Acid Rain Program, environmental regulation on sulfur dioxide, induces deregulated plants to disproportionately switch to cleaner and cheaper sub-bituminous coal, it is challenging to identify what cost reductions would have been absent the environmental regulation. I estimate 3% as the lower bound effect of deregulation. Despite the small effect on average, plants exhibit heterogenous reponses to deregulation. When plants procure coal via bilateral contracts, an amount of cost reductions a plant can attain depends on its incentive and ability to negotiate. I find that deregulated plants with unfavorable contracts and bigger production capacity achieve substantial cost reductions; 18% and 9%, respectively. The second essay studies the impact of power company mergers on fuel sourcing decisions. Specifically, I study whether coal-fired power plants consolidate their supplier base upon a merger. I find that a pair of two merging plants becomes 23% more likely to source from common suppliers. Plant pairs also increase their dependence on the common suppliers. I find that a fraction of total coal delivery from the common suppliers increases by 47% upon a merger.

Subject Area

Environmental economics|Economics|Energy

Recommended Citation

Han, Jin Soo, "Essays on the U.S. Electricity Sector" (2017). Dissertations available from ProQuest. AAI10273276.
https://repository.upenn.edu/dissertations/AAI10273276

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