Title：The Value of Infrastructure and Market Integration: Evidence from Renewable Expansion in Chile 

Speaker:  Koichiro Ito, University of Chicago

Time: Nov.5, 10:00 -11:30 (Beijing Time)

About the speaker:

Koichiro Ito is an Associate Professor at Harris School of Public Policy at University of Chicago. He received a BA from Kyoto University, an MA from University of British Columbia, and a PhD from UC Berkeley. Prior to joining University of Chicago, he was a SIEPR Postdoctoral Fellow at Stanford University and an Assistant Professor at Boston University. His research interests lie at the intersection of environmental and energy economics, industrial organization, and public economics. 

Abstract:

Effective and economical expansion of renewable energy sources is one of the most urgent and important challenges of addressing climate change. A central obstacle to this expansion is that existing network infrastructures (i.e., transmission networks) were not originally built to accommodate renewable energy such as solar and wind power, which are best generated at locations far from centers of demand. To design effective new infrastructure networks that connect the energy demand with renewable energy supply, it is essential to understand how such networks affect electricity markets both in the short-run, through changes in supply and demand of existing suppliers and consumers, and in the long-run, through the potential impacts on firms’ investments in new power plants. There is however limited research and evidence on this pressing question, which makes it difficult for policymakers to develop effective solutions. To address this gap, this project will provide a new theoretical framework to accommodate both short-run and long-run impacts of new infrastructures on electricity markets. We will then apply this framework to newly-collected comprehensive microdata from the Chilean electricity market to conduct empirical analysis based on quasi-experimental methods and structural estimation. The Chilean electricity market offers an ideal research environment to explore the broad implications of renewable energy – it is one of the frontier nations in terms of rapid growth in renewables; it provides access to detailed microdata; and its relatively simple geography facilitates transparent and tractable empirical analysis. Our project will be the first study to provide short-run and long-run analyses of the interactions between renewable expansions, new transmission networks, and electricity markets. The findings and insights from this research will be relevant to other countries around the world and can inform policy to encourage the design of new infrastructure networks that will effectively and economically integrate renewables into energy markets.