Michelle Hallack

Regulation is generally interpreted as a relational contract between governments and private companies. Besides, regulation plays either a positive or a negative role in infrastructure development. This article is intended to understand the hindrance to stable policies in the regulation of network infrastructures. An original model where governments have a conflictive relationship with regulated companies was developed. The governmental opportunistic behaviour, which undermines the regulatory… Show more

Regulation is generally interpreted as a relational contract between governments and private companies. Besides, regulation plays either a positive or a negative role in infrastructure development. This article is intended to understand the hindrance to stable policies in the regulation of network infrastructures. An original model where governments have a conflictive relationship with regulated companies was developed. The governmental opportunistic behaviour, which undermines the regulatory independence, was introduced in an infinitely repeated game. By including this variation, the hold-up problem can be modelled since a time inconsistency may occur. The model was illustrated using past-decade events about the Argentinean transport network of natural gas, proposing a possible reason for the triggering of a sustained hold-up. Show less

We consider the electric vehicle industry as a complex system within which firms choose among competing organisational architectures and regulatory institutions emerge from the interaction between firms' choices and rule-makers' beliefs. The main drivers to change regulatory institutions are the 'evaluative criteria' applied to outcomes. Evaluative criteria are rule-makers' simplified models against which outcomes are evaluated. We look at the emergence of dominant organisational structures… Show more

We consider the electric vehicle industry as a complex system within which firms choose among competing organisational architectures and regulatory institutions emerge from the interaction between firms' choices and rule-makers' beliefs. The main drivers to change regulatory institutions are the 'evaluative criteria' applied to outcomes. Evaluative criteria are rule-makers' simplified models against which outcomes are evaluated. We look at the emergence of dominant organisational structures, and point at the importance of the institutional design in such process. In particular, we analyse the interaction between policy choices: we consider policy makers that have two main dimensions upon which to act: they may facilitate cooperative strategies, or they may implement demand-side measures. Show less

In Brazil, a scoring auction decides which firm has the right to explore oil and gas in a region.
One of its dimensions is the amount of local content that firms are willing to implement.
However, local content programs are subject to significant uncertainty and complexity so mal‐adaptation costs are relevant. We characterize players’ bidding behavior when they have information on local content implementation and when they do not. We test those predictions using historical bids. Our… Show more

In Brazil, a scoring auction decides which firm has the right to explore oil and gas in a region.
One of its dimensions is the amount of local content that firms are willing to implement.
However, local content programs are subject to significant uncertainty and complexity so mal‐adaptation costs are relevant. We characterize players’ bidding behavior when they have information on local content implementation and when they do not. We test those predictions using historical bids. Our tests suggest that the mechanism would be more efficient if the definition of local content programs was left out of the auction. Show less

This paper investigates third party access regulatory issues in China’s natural
gas industry. We study the development of China’s gas market-oriented reform and
how third party access becomes a pressing issue in that context. This paper aims to
report stakeholders’ benefit and distributional effects during a hypothetical third party
access process. To that end, we apply an oligopolistic equilibrium model, based on
the mixed complementarity problem, to China’s gas pipeline… Show more

This paper investigates third party access regulatory issues in China’s natural
gas industry. We study the development of China’s gas market-oriented reform and
how third party access becomes a pressing issue in that context. This paper aims to
report stakeholders’ benefit and distributional effects during a hypothetical third party
access process. To that end, we apply an oligopolistic equilibrium model, based on
the mixed complementarity problem, to China’s gas pipeline network. We compare
two scenarios: a scenario without third party access and the other scenario where an
independent pipeline operator optimizes flows. This latter scenario aims to guarantee
that the maximum social benefit is achieved. In addition, the latter scenario transfers
the congestion rent to former integrated gas companies to compensate their actual
loss control of the pipeline operation, in order to minimize the adverse distributional
effects for pipeline companies. The solution of the model indicates that operational
separation is feasible with Pareto improvement in China’s context. Moreover, it merits particular attention from policy makers in China that pipeline capacity scarcity should
be properly evaluated and managed. Show less

This paper tackles the problem of defining the marginal costs in presence of integer non-convexities in the context of short-term power auctions. In general, there are two main problems associated with integer decisions: i) the definition of a cost recovery mechanism (as average costs may be above marginal costs when there are integer non-convexities); and ii) the representation of forward-looking opportunity costs in presence of non-convexities. We show that both problems need to be addressed.… Show more

This paper tackles the problem of defining the marginal costs in presence of integer non-convexities in the context of short-term power auctions. In general, there are two main problems associated with integer decisions: i) the definition of a cost recovery mechanism (as average costs may be above marginal costs when there are integer non-convexities); and ii) the representation of forward-looking opportunity costs in presence of non-convexities. We show that both problems need to be addressed. Cost recovery is not necessarily ensured by implementing efficient signals and, conversely, solving the cost-recovery problem does not ensure that opportunity costs are included in short-run marginal costs. Applying fundamental economic principles, we redefine short-run marginal costs in order to include all opportunity costs associated with integer decisions. We show that short-run marginal costs are efficient long-term signals only when they include all opportunity costs. We use a purely complex auction as the context for our analysis, but the basic principles used in the paper applies also to the case of sequential clearing with complex bidding rules (the case of many EU power systems). Finally, we place other existing proposals of marginal cost definition within our framework in order to compare them with our analysis. Show less

Long-term contracting is the traditional governance mechanism to deal with the transaction costs associated with the specificity of gas industry assets. Long-term contracts have been often used to allocate risks among players, and to that end, they often include take-or-pay provisions. These clauses specify that buyers take the volume risk, as they are obliged to pay for a minimum amount of gas consumption. In exchange, buyers pay a predefined price, supposedly lower than the risk-neutral… Show more

Long-term contracting is the traditional governance mechanism to deal with the transaction costs associated with the specificity of gas industry assets. Long-term contracts have been often used to allocate risks among players, and to that end, they often include take-or-pay provisions. These clauses specify that buyers take the volume risk, as they are obliged to pay for a minimum amount of gas consumption. In exchange, buyers pay a predefined price, supposedly lower than the risk-neutral expectation of short-term gas prices. In that view, if the buyer is able to resell that gas in the short term, the contract is an effective hedge against short-term volatility. Otherwise, the contract does not act as a hedge but it becomes a sunk cost. The corresponding power producers' behavior involves not only output decisions but also financial decisions. To analyze that situation, this paper develops a new quantitative methodology that allows comparing risk-neutral valuations of gas and power markets decisions. We test the model in a real-size system, and show the additional cost of the power system associated with a possible illiquidity of the short-term gas market. Show less

This paper explains the diversity in the institutional designs that coordinate network industries by analyzing the economic rationale of the design of rules to use the networks. We identify the network as a common-pool resource, and point at the definition of property rights as the elementary decision in the design of rules. It requires choosing what network characteristics need to be measured by market participants. We show that the institutional diversity is explained by the rationale behind… Show more

This paper explains the diversity in the institutional designs that coordinate network industries by analyzing the economic rationale of the design of rules to use the networks. We identify the network as a common-pool resource, and point at the definition of property rights as the elementary decision in the design of rules. It requires choosing what network characteristics need to be measured by market participants. We show that the institutional diversity is explained by the rationale behind that choice. The benefits of defining property rights come in terms of efficiency: the improvement in the coordination of participants’ information on the value of networks. The costs are associated with measuring network characteristics. When costs are higher than benefits for a certain network service, markets are no longer an adequate way to coordinate its allocation. In addition, when participants are heterogeneous, the benefits of measuring are high. Show less

The institutional setting of open gas networks and markets is revealing considerably diverse and diverging roads taken by the US, the EU, Brazil and Australia. We show that this divergence is explained by key choices made in the primary liberalization process, which is based on a redefinition of the transmission system property rights. This redefinition in turn leads to different regimes for the transmission services, as well as for the gas commodity trade, which depends on the network services… Show more

The institutional setting of open gas networks and markets is revealing considerably diverse and diverging roads taken by the US, the EU, Brazil and Australia. We show that this divergence is explained by key choices made in the primary liberalization process, which is based on a redefinition of the transmission system property rights. This redefinition in turn leads to different regimes for the transmission services, as well as for the gas commodity trade, which depends on the network services for any market deal to network, but also the perceived difficulties and institutional costs to coordinate the actual transmission services through certain market arrangements. Show less

In the EU, gas markets are based on socializing network flexibility services. However, shippers have different preferences on network flexibility, which are not reflected in current allocation models. We propose the introduction of auction mechanisms to allocate network services in the short run. The auction aims to represent simultaneously the diversity of players′ preferences and the trade-offs implied by network constraints. Two sealed-bid auctions are proposed: (a) an auction based on bids… Show more

In the EU, gas markets are based on socializing network flexibility services. However, shippers have different preferences on network flexibility, which are not reflected in current allocation models. We propose the introduction of auction mechanisms to allocate network services in the short run. The auction aims to represent simultaneously the diversity of players′ preferences and the trade-offs implied by network constraints. Two sealed-bid auctions are proposed: (a) an auction based on bids for gas, which allocates network services through the minimization of gas price differences; (b) an auction with explicit bids for line-pack, which allows shippers′ valuation of line-pack storage. Show less

Strategic interaction between gas and electricity sectors is a major issue in the implementation of competitive energy markets. One relevant aspect of the problem is the potential for input foreclosure between gas and power industries. In this paper, we are concerned with situations where input foreclosure opportunities are associated with the choice of market design. In particular, we study input foreclosure in the case that the short-term capacity allocation mechanism of gas networks raises… Show more

Strategic interaction between gas and electricity sectors is a major issue in the implementation of competitive energy markets. One relevant aspect of the problem is the potential for input foreclosure between gas and power industries. In this paper, we are concerned with situations where input foreclosure opportunities are associated with the choice of market design. In particular, we study input foreclosure in the case that the short-term capacity allocation mechanism of gas networks raises barriers to cross-border trade. In that situation, one may find gas markets that are isolated only in the short term. We explain players' ability to influence the electricity price using their gas decisions in those isolated markets. We also show that this should be a concern of EU capacity allocation mechanisms, which provide spatial flexibility in the short term to promote liquidity, at the cost of creating barriers to cross-border trade. Therefore, input foreclosure opportunities are additional costs to be taken into account when weighing benefits and drawbacks of European gas market designs. Show less

Following the discovery of the pre-salt petroleum fields, Brazil changed the regulatory framework of the oil industry upstream. Its main objectives are three-fold: (i) increasing the government take; (ii) mitigating the oil curse; (iii) developing the national oil industry. The paper attempts to ‘ex-ante’ assess whether the instruments of the new framework (e.g., the change in the oil regime, the creation of a social fund, the exclusive E&P rights to Petrobras) will be able to achieve these… Show more

Following the discovery of the pre-salt petroleum fields, Brazil changed the regulatory framework of the oil industry upstream. Its main objectives are three-fold: (i) increasing the government take; (ii) mitigating the oil curse; (iii) developing the national oil industry. The paper attempts to ‘ex-ante’ assess whether the instruments of the new framework (e.g., the change in the oil regime, the creation of a social fund, the exclusive E&P rights to Petrobras) will be able to achieve these objectives (i.e., goal effectiveness) and whether the costs they entail are lower than their benefits (i.e., welfare increase). Our assessment shows that the new regulatory regime is likely to succeed. In this paper we identify what are the objectives of the new regulatory framework through the analysis of government and policy-makers declaration. We describe the instruments that the new regulatory framework contain to achieve the objectives. We examine whether the instruments seem well-suited to face the objectives. Moreover, by taking into account also the costs of the instruments, we wonder whether the welfare is likely to increase. And then, we identify some open issues regarding the implementation that may strongly impact the welfare. This paper is a prospective analysis and there are still some key open elements about how the new regulatory framework will be implemented. We cannot forecast the future but we show that it is likely that the goals will be achieved and this achievement is likely to be welfare improving. Show less

The liberalization process of the gas sector has showed that the reasoning to introduce competition in gas industries separates the services in at least two groups: commodities with relatively low transaction costs, and hence suitable to short-term market coordination, and network services which concentrate most of the specificities related to the physical flows. However, the way to coordinate such network services is still under debate. In this view, in USA specific services are coordinated… Show more

The liberalization process of the gas sector has showed that the reasoning to introduce competition in gas industries separates the services in at least two groups: commodities with relatively low transaction costs, and hence suitable to short-term market coordination, and network services which concentrate most of the specificities related to the physical flows. However, the way to coordinate such network services is still under debate. In this view, in USA specific services are coordinated through long term contracts, whereas the EU regulatory frame socializes the costs of the network services. In this paper, we develop a general analysis of the major consequences of this fundamental regulatory choice. In addition, we build on such analysis to explain the differences among the current proposals to design the coming European Internal Market. Show less

Designing a gas market is defining how the commodity, the transmission and ancillary
services are traded. The European Union has built the commoditization of
natural gas through the socialization of several costs of trade. This choice aims at
obtaining more liquid markets through the creation of virtual hubs of trade. These
virtual hubs ignore most of the network and of the physical gas flows by the creation
of entry/exit market zones. Thus the definition of such market zones has… Show more

Designing a gas market is defining how the commodity, the transmission and ancillary
services are traded. The European Union has built the commoditization of
natural gas through the socialization of several costs of trade. This choice aims at
obtaining more liquid markets through the creation of virtual hubs of trade. These
virtual hubs ignore most of the network and of the physical gas flows by the creation
of entry/exit market zones. Thus the definition of such market zones has tied EU
markets inside virtual trading zones (national or sub-national). We show the consequences
and the challenges of this European choice, especially at the cross-zone
level (often at country cross-border). Once “entry/exit” trade arrangements are preferred,
the use of market-based mechanisms for cross-zone decisions like network
investments becomes less natural. Show less

The liberalization of the natural gas industry has been based on the idea that the same infrastructure may be used by different gas owners. Different players using the same resources can give raise to ‘commons dilemmas’, which is defined by a conflict between individual rationality and group rationality. The individual rationality leads to an outcome that is not rational from the perspective of the group. To avoid 'commons' inefficiencies, it is necessary to establish rules that constrain the… Show more

The liberalization of the natural gas industry has been based on the idea that the same infrastructure may be used by different gas owners. Different players using the same resources can give raise to ‘commons dilemmas’, which is defined by a conflict between individual rationality and group rationality. The individual rationality leads to an outcome that is not rational from the perspective of the group. To avoid 'commons' inefficiencies, it is necessary to establish rules that constrain the players’ use of the network. The rules of a 'common pool' may be established through external authority or by the users themselves. In gas industries, the regulators play the role of external authority. The definition of rules by the users themselves is implemented through players’ agreements. In the first case the access is completely opened and the same set of rules is applied to every player (common carriage). In the second case, the design of a system of rights is based on players’ commercial agreements (contract carriage). Traditionally, the choice is made paying attention to the impact of the rules on the allocation of existent resources (appropriation) and taking into account only an average consumer. We show that, as proposed by the common pool theory, the use of average consumer preferences to define the rules of infrastructure may result in inefficient output. Moreover, we show that there is also the dynamic impact of the choice of carriage system. One of the main incentives for new investment is the use of the current infrastructure. As the carriage system impacts on the use of the infrastructure, it also has consequences on the long-term dynamics of the gas infrastructure. We compare investment signals in EU industries, based on common carriage systems, and in USA, based on contract carriage systems. The analysis allows us to identify missing economic signals in the EU regulatory framework. Show less

This paper analyses the value and cost of line-pack flexibility in liberalized gas
markets through the examination of the techno-economic characteristics of gas
transport pipelines and the trade-offs between the different ways to use the
infrastructure: transport and flexibility. Line-pack flexibility is becoming
increasingly important as a tool to balance gas supply and demand over different
periods. In the European liberalized market context, a monopolist unbundled… Show more

This paper analyses the value and cost of line-pack flexibility in liberalized gas
markets through the examination of the techno-economic characteristics of gas
transport pipelines and the trade-offs between the different ways to use the
infrastructure: transport and flexibility. Line-pack flexibility is becoming
increasingly important as a tool to balance gas supply and demand over different
periods. In the European liberalized market context, a monopolist unbundled network
operator offers regulated transport services and flexibility (balancing) services
according to the network code and the balancing rules. Therefore, gas policy makers
should understand the role and consequences of line-pack regulation. The analysis
shows that the line-pack flexibility service has an important economic value for the
shippers and the TSO. Furthermore, the analysis identifies distorting effects in the
gas market due to inadequate regulation of line-pack flexibility: by disregarding the
fixed cost of the flexibility in the balancing rules, the overall efficiency of the gas
system is decreased. Because a full market based approach to line-pack pricing is
unlikely, a framework is presented to calculate a cost reflective price for pipeline
flexibility based on the trade-offs and opportunity costs between the right to use the
line-pack flexibility and the provision of transport services. Show less

Gas transportation networks exhibit a quite substantial variety of technical and economical properties ranges roughly from an entrenched natural monopoly to near to an open competition platform. This empirical fact is widely known and accepted. However the corresponding frame of network analysis is lacking or quite fuzzy. As an infrastructure, can a gas network evolve or not from a natural monopoly (an essential facility) to an open infrastructure (a “highway” facility)? How can it be done with… Show more

Gas transportation networks exhibit a quite substantial variety of technical and economical properties ranges roughly from an entrenched natural monopoly to near to an open competition platform. This empirical fact is widely known and accepted. However the corresponding frame of network analysis is lacking or quite fuzzy. As an infrastructure, can a gas network evolve or not from a natural monopoly (an essential facility) to an open infrastructure (a “highway” facility)? How can it be done with the same transportation infrastructure components within the same physical gas laws? Our paper provides a unified analytical frame for all types of gas transportation networks. It shows that gas transport networks are made of several components which can be combined in different ways. This very “lego property” of gas networks permits different designs with different economic properties while a certain infrastructural base and set of gas laws is common to all transportation networks. Therefore the notion of “gas transportation network” as a general and abstract concept does not have robust economic properties. The variety and modularity of gas networks come from the diversity of components, the variety of components combinations and the historical inclusion of components in the network. First, a gas network can combine different types of network components (primary or secondary ones). Second, the same components can be combined in different ways (notably regarding actual connections and flow paths). Third, as a capital-intensive infrastructure combining various specific assets, gas transportation networks show strong “path dependency” properties as they evolve slowly over time by moving from an already existing base. Show less

Neo-institutional economics (NEI) has long shown that take-or-pay (ToP) long-term contracts provide a robust framework for safeguarding the interests of both upstream and downstream parties in the gas industry. The case of gas trade between Brazil and Bolivia presents an opportunity to re-examine empirically and to review the robust nature of the ToP framework over time. This case reveals that the positions of the contractors actually change giving rise to a veritable lifecycle of the… Show more

Neo-institutional economics (NEI) has long shown that take-or-pay (ToP) long-term contracts provide a robust framework for safeguarding the interests of both upstream and downstream parties in the gas industry. The case of gas trade between Brazil and Bolivia presents an opportunity to re-examine empirically and to review the robust nature of the ToP framework over time. This case reveals that the positions of the contractors actually change giving rise to a veritable lifecycle of the contractual arrangement. Such a contract can be seen to span three successive phases. The first phase of the contract cycle begins when it is signed; allowing the investments to begin. The second phase starts when investments have been completed and the actual trade in gas begins. The third phase of the contract cycle comes when the increasing flow of gas comes close to saturating capacity and the volume levels for downstream market volume have been reached. These three contract phases are thus distinguished by how robust the alignment of the parties’ interests is. The added value of the paper is then both empirical and analytical: the case study provides a brand new lifecycle analysis of the performance of ToP long-term contracting into an NEI framework Show less

Gas markets based on virtual hubs has been the preferred EU design. Such market designs are based on socializing network flexibility services. Nonetheless, shippers have different preferences about the network flexibility, which are not reflected in current allocation models. Consequently, two scenarios are possible: free flexibility or absence of flexibility. We propose the introduction of auction mechanisms to deal with network service allocation in the short term. The auction aims to… Show more

Gas markets based on virtual hubs has been the preferred EU design. Such market designs are based on socializing network flexibility services. Nonetheless, shippers have different preferences about the network flexibility, which are not reflected in current allocation models. Consequently, two scenarios are possible: free flexibility or absence of flexibility. We propose the introduction of auction mechanisms to deal with network service allocation in the short term. The auction aims to represent simultaneously the diversity of players‟ preferences and the trade-offs implied by network constraints. Two sealed-bid auctions are proposed. On the one hand, an auction with one product allocates network services through the minimization of gas price differences. On the other, a multi-product (gas and line-pack storage) auction is designed to facilitate the revelation of preferences on line-pack storage. Show less

The current definition of “commercial” gas networks in the European Union (EU) is based on entry/exit schemes and balancing mechanisms. This regulation of grid services aims to enhance the liquidity of wholesale markets. In order to facilitate the gas commodity trade among players with different network usage profiles and different network connection points, some network services are socialized across the market zone. That socialization of network services in the EU leaves the task to reconcile… Show more

The current definition of “commercial” gas networks in the European Union (EU) is based on entry/exit schemes and balancing mechanisms. This regulation of grid services aims to enhance the liquidity of wholesale markets. In order to facilitate the gas commodity trade among players with different network usage profiles and different network connection points, some network services are socialized across the market zone. That socialization of network services in the EU leaves the task to reconcile physical gas flows and commercial gas flows to a regulated system operator. We show that in practice, it leads, on the one hand, to offer less “commercial” transmission capacity than the physical capacity of the network, and on the other, to the cross-subsidization of line-pack services between high profile and low profile users. The guidelines proposed by the Agency for the Cooperation of Energy Regulators (ACER) for the gas balancing network code do not explicitly address all the drawbacks of existing entry/exit schemes, but they leave room to design mechanisms that increase the efficiency of short-term network allocation. Contributing to this open debate, we point out that improved allocation comes with market mechanisms to allocate short-term network services, instead of relying solely on Transmission System Operators' management of network resources. Show less

Both gas and electricity market designs depend on how the network use is regulated. Those regulations tend to promote contracts that simplify some of the network specificities in order to increase market thickness. However, those simplifications often come at the cost of distorting network use and investment signals. This problem and the consequences of different designs have been studied for each industry separately. This paper contributes by showing the cross-industry interactions. From this… Show more

Both gas and electricity market designs depend on how the network use is regulated. Those regulations tend to promote contracts that simplify some of the network specificities in order to increase market thickness. However, those simplifications often come at the cost of distorting network use and investment signals. This problem and the consequences of different designs have been studied for each industry separately. This paper contributes by showing the cross-industry interactions. From this view, distortions depend not only on network simplifications in one market but on the particular combinations of market designs, i.e. choices about network simplification in both markets. Therefore, policy makers concerned with gas and electricity market designs should take into account the results of network rules interaction. We use simple auction designs to represent both markets, and we analyze how players are expected to respond to different network rules. Thus, looking from the perspective of gas-fired power plants, we study the incentives given by the designs for the use of each network. We also identify long-term investment effects of such design strategies. Show less

Os leilões são mecanismos bem-sucedidos em diversas situações, contudo, os desenhos desses mecanismos dependem fortemente das necessidades específicas do contexto em que são inseridos (local, momento e características dos bens leiloados). O objetivo tradicional do uso de leilões, na indústria brasileira de gás natural, foi a maximização da renda, extraída da alocação de blocos para exploração e produção de hidrocarbonetos. Esse artigo propõe o uso de leilões para incrementar a eficiência da… Show more

Os leilões são mecanismos bem-sucedidos em diversas situações, contudo, os desenhos desses mecanismos dependem fortemente das necessidades específicas do contexto em que são inseridos (local, momento e características dos bens leiloados). O objetivo tradicional do uso de leilões, na indústria brasileira de gás natural, foi a maximização da renda, extraída da alocação de blocos para exploração e produção de hidrocarbonetos. Esse artigo propõe o uso de leilões para incrementar a eficiência da coordenação dos agentes da indústria, na comercialização e no transporte. Em diferentes países, a indústria de gás desenvolve-se baseada nas relações de longo prazo entre seus agentes, no entanto, ajustes de curto prazo são necessários. Os leilões, que agora sugerimos, objetivam facilitar os ajustes de curto prazo entre a oferta e a demanda de gás natural no Brasil. Assim, eles serão, também, um apoio na formação de preços de curto prazo e na alocação eficiente dos serviços de transporte. Para tanto, apoiando-se na experiência internacional, proporemos o uso de leilões combinatórios, que permitam a representação da interdependência entre o gás ‘molécula’ e os serviços de transporte necessários. Show less

In Brazil, the consensus that natural gas regulation has failed to attract investments, especially from private companies, culminated in a new law for the natural gas sector, passed in March 2009 (Law No. 11,909). The most significant change this new law introduced was the new governmental role in co-ordinating investments in the transportation sector. The Brazilian government has had to plan pipeline networks, estimate the size of demand for transportation and organise bidding to select… Show more

In Brazil, the consensus that natural gas regulation has failed to attract investments, especially from private companies, culminated in a new law for the natural gas sector, passed in March 2009 (Law No. 11,909). The most significant change this new law introduced was the new governmental role in co-ordinating investments in the transportation sector. The Brazilian government has had to plan pipeline networks, estimate the size of demand for transportation and organise bidding to select investors for new pipeline projects. Although the law has established a clear regulatory framework for the midstream sector, providing stability and the legal certainty necessary for long-term investments in assets with high specificity, it has not been able to fill all of the gaps that remain under Law 9,478. In this sense, besides the challenges related to effective implementation of the regulatory attributes defined in Law 11,909, the absence of certain issues prevents the modified legal structure from encouraging the entry of new players in the transportation sector. This paper has identified, according to the neo-institutional view, the mechanisms of co-ordination introduced by the new law and the limitations of the new regulatory framework Show less

An important problem that has attracted significant amount of attention within the context of energy transitions is the carbon lock-in: a situation in which energy systems are locked-in to high carbon technologies through a path-dependent process. Several measures to avoid the carbon lock-in involve technology-specific measures, which in turn implies that those measures may result in an energy system locked-in to certain low carbon technologies. We consider that the Brazilian system needs… Show more

An important problem that has attracted significant amount of attention within the context of energy transitions is the carbon lock-in: a situation in which energy systems are locked-in to high carbon technologies through a path-dependent process. Several measures to avoid the carbon lock-in involve technology-specific measures, which in turn implies that those measures may result in an energy system locked-in to certain low carbon technologies. We consider that the Brazilian system needs policies to escape the carbon lock in, which are based on providing incentives to low carbon technologies. We develop an analytical framework to analyze the role of regulatory institutions in the possible lock-in to utility-scale photovoltaic, in the sense that they create barriers to the adoption of distributed-generation photovoltaic. We show that the definition of a process to adapt the institutional framework in a context of stress in the innovation system is crucial for the adoption of new technologies. Applying our framework to the Brazilian power sector, we observe that only when regulators consider the possibility that the system is locked-in to centralized production technologies (and not when they just consider the carbon lock-in) they manage to eliminate barriers to distributed generation based on solar PV.
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Gas sector liberalization is based on opening networks to different players, so they become common pool resources. Different players using the same resources can give rise to “commons’ dilemmas”. To avoid them, rules must be established to constrain players’ use of the network. We build on the concept of common's pool resources to analyze the logic for and consequences of different institutional settings governing the use of gas pipelines. We show that rules based on regulation imply ex ante… Show more

Gas sector liberalization is based on opening networks to different players, so they become common pool resources. Different players using the same resources can give rise to “commons’ dilemmas”. To avoid them, rules must be established to constrain players’ use of the network. We build on the concept of common's pool resources to analyze the logic for and consequences of different institutional settings governing the use of gas pipelines. We show that rules based on regulation imply ex ante decisions that preclude players to choose the preferred output. This limitation may be removed by rules designed by market players. We also show that the mechanism to define the rules is based on the definition of network use property rights. The practical implications of our approach are stressed by comparing the US mechanism (negotiated rules) and the EU mechanism (regulated rules). Show less