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Optimizing the Electricity Bill Creating a two-part electricity tariffs to induce a targeted level of rooftop solar adoption while meeting utility operating expenses

By Hoel Weisner

Renewable energy technologies are a much needed, clean alternative to the conventional fossil fuel electricity power plants of the last century. The market for installing solar panels on rooftops is a highly promising avenue for expanding the use of these technologies, but its profitability depends significantly on the electricity prices offered by electric utilities. Investing in solar panels offset a percentage of the electricity purchased from the utility. This paper models the investment decision of electricity consumers and looks at what the optimal per unit price of electricity should be in order to make building solar panels a profitable decision for a target share of households. The model shows how this optimal rate decreases at lower prices of investing, when the share of utility-purchased electricity offset by the panels increases, and when the target level of solar adoption decreases. Finally, it looks at how this per unit rate impacts the utility’s decision to set a fixed monthly charge for electricity in order to recover all of its operating expenses.

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Advisor: Leslie Marx | JEL Codes: L94, Q42, Q48 | Tagged: Electricity Price, Renewable Energy, Solar Electricity

Collusion with Three Bidders at First-Price Auctions

By Andrew Born

Lopomo, Marx & Sun (2009) show that, given a speci…fied environment, pro…table collusion is not possible for a two-person bidding ring operating at a fi…rst-price sealed-bid auction. This research investigates the rigor of their result by expanding the theoretical framework to the case of a three-bidder cartel. The output generated from the linear programming model con…firms the authors’earlier result. This is a key …finding as it is the …first to establish a basis for comparison of equilibrium surplus scenarios among multiple-bidder auction formats. The analytic and numerical results pave the way for future research examining the effect of cartel size on profi…tability and have many real-world implications for both private and public policy alike.

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Advisor: Leslie Marx

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