Three Essays on Energy Policy and Investment

[摘要] In three chapters, this dissertation studies firm investment decisions in contexts informative for the design of energy policy.The first chapter studies electricity-intensive manufacturers;; decision to buy machinery and equipment; the second and third chapters study developers;; decision to build new wind energy projects.The first chapter investigates the relationship between electricity price volatility and the investment dynamics of manufacturers.I first find that electricity-intensive manufacturers respond to higher electricity prices by reducing their capital expenditures. I then use a dynamic model of manufacturer investment with capital adjustment costs to study the implications of this response for efficiency.I find that policies that reduce electricity price volatility, such as building transmission to integrate electricity markets, increase aggregate productivity by allowing these firms to better match capital to where it is most productive.The second chapter examines the effect on wind energy investment of awarding subsidies as non-refundable tax credits rather than as grants. The non-refundable production tax credit (PTC) is a large subsidy for wind energy.Firms can only use the PTC to reduce their taxes, an important restriction since the subsidy is large relative to their tax bill.Taking advantage of a temporary program that allowed wind developers to choose between the PTC and a cost-based, grant subsidy, I use a revealed preference approach to infer how developers trade off non-refundable tax credits and grants.I find that wind developers substantially discounted non-refundable tax-credits relative to grants, and I show that offering the PTC as a grant would increase investment by up to ten percent.The third chapter is joint work with Chenyu Yang and studies the relationship between policy uncertainty and wind energy investment.We focus on uncertainty about the same PTC studied in chapter two. This subsidy was typically extended for only a few years at a time, and, at each expiration, the industry faced uncertainty about whether the subsidy would be renewed.Using wind project-level data, we verify that investment responded to these potential expirations.However, we find that uncertainty did not affect project size, ruling out one channel through which uncertainty may have reduced efficiency.

[发布机构] University of Michigan

[效力级别] Industrial Organization

[关键词] Energy;Industrial Organization;Investment;Economics;Business and Economics;Economics