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Energy Economics: Can Energy Communities beat the Tragedy of the Commons?

Energy Economics: Can Energy Communities beat the Tragedy of the Commons?
Typ:Bachelorarbeit
Datum:sofort
Betreuer:

Frederik vom Scheidt

Motivation
Many citizens in Germany and the EU are regarding electricity supply as a right. The capacity of electric distribution grids historically has been regarded a public good, which assumes (a) non-excludability and (b) no rivalry in usage. As decentralized renewable electricity generation increases and electric vehicles are adopted on a large scale, distribution grids will increasingly be prone to local grid congestion. Thus, at certain times and at certain locations distribution grid capacity will experience short-term rivalry in usage, while access to the grid remains unlimited. These two characteristics temporarily render distribution capacity a common pool resource (CPR) instead of a public good. CPRs are at the risk to fall victim to the Tragedy of the Commons. The Tragedy of the Commons predicts that a good will be overused if the following circumstances apply: (a) the goods availability is limited, (b) access to the good is not limited, (c) demand is larger than supply, and (d) each individual maximizes their personal utility, not considering the any external effects they cause (Hardin, 1968). Arguably, all four conditions will occur for distribution capacity in the future. Therefore, distribution capacity is prone to over-usage, which would cause grid instabilities and blackouts, resulting in significant welfare losses. This motivates the topic of this thesis.

Scope of thesis
Within the scope of the thesis, the student will first conduct a review of the three established approaches from economic theory on how to effectively manage CPRs: (a) government regulation, (b) privatization and subsequent management by private companies, and (c) self- governance by a community (Hirth and Glismann, 2018). The student will then classify existing real-world approaches to deal with grid congestion into these categories and discuss community-centered approaches as an alternative way to overcome the tragedy of the commons for distribution grid capacity. This can be done by applying the well-established Framework for analysis of self-organizing and self-governing CPRs  to assess the key preconditions for successful community-based management in this case (Ostrom et al., 1992). Finally, the thesis should outline special challenges and risks of community-based governance in the case of distribution grid capacity.

Formalities
The thesis should be written in English. It can be started immediately.
Please send your application containing a short and motivation, your CV, transcript of records, and references to: frederik.vomscheidt@kit.edu

Requirements

  • High motivation
  • Very good command of written English (at least B2)
  • Interest and basic knowledge in economics
  • Prior knowledge of electricity markets and grid congestion is a plus

Literature

  • L. Hirth  and  S.  Glismann,  “Congestion  Management:  From  Physics to  Regulatory  Instruments,” Working & Discussion Papers / Preprints, EconStor Direct , 2018.
  • G. Hardin, “The tragedy of the commons,” Science , vol. 162, no. 3859, pp. 1243–1248, 1968.
  • Ostrom, E., Walker, J., & Gardner, R. (1992). Covenants with and without a Sword: Self-Governance Is Possible. American Political Science Review, 86(2), 404-417. doi:10.2307/1964229
  • A. Bilek, “Revitalizing rural communities through the renewable energy cooperative,” in Series on the German Energy Transition (3 of 6) . Heinrich Böll Stiftung, 2012.
  • Yoeli, Erez et al. “Powering up with indirect reciprocity in a large-scale field experiment.” Proceedings of the National Academy of Sciences of the United States of America vol. 110 Suppl 2, Suppl 2 (2013): 10424-9. doi:10.1073/pnas.1301210110