Economics of Regulating Markets

Faculteit Economie en Bedrijfskunde
Jaar 2021/22
Vakcode EBM148A05
Vaknaam Economics of Regulating Markets
Niveau(s) master, uitwisseling
Voertaal Engels
Periode semester II b
ECTS 5
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Uitgebreide vaknaam Economics of Regulating Markets
Leerdoelen Upon completion of the course the student is able to:
1. use insights from micro-economics, finance as well as international economics to discuss the way network industries in particular in energy, but also in transport and telecom could be regulated;
2. apply (basic) quantitative techniques to assess the costs of a network operator, to determine the appropriate reward on capital (WACC) and to evaluate how competition in wholesale and retail energy markets evolves;
3. understand academic papers on the design of regulation of in particular energy markets and how the effects of regulation could be evaluated.
Omschrijving The central theme of the course is: how do energy markets, in particular electricity and gas markets, function and how can this be improved by governments (regulators). The functioning of energy markets differs from many other sectors because of the economies of scale of the networks, resulting in natural monopolies, the importance of network balance, the societal objective to radically change the nature of the energy industry (i.e. energy transition) and the fact that energy is a basic commodity which is needed by everyone. Topics to be discussed are among others: how to determine the tariffs that an operator of an electricity or gas network is allowed to charge on users of the infrastructure? How to implement competition in the energy industry, both on wholesale level and retail level? To what extent need the energy markets be changed because of the energy transition in which fossil technologies are replaced by renewable sources (as wind and solar)? How to give incentives to energy producers and consumers to reduce carbon emissions?
Knowledge of economics of regulating market is useful for positions within regulated companies (TenneT, Gasunie, etc.), companies using regulated infrastructures (in particular large energy users), governments (national, EU), regulatory bodies (ACM, ACER, etc.) and consultancies (PWC, Oxera, etc.).
The course not only deals with the economic theory behind the regulation of markets, but also applies this theory to real-life problems in energy markets. The course consists of lectures and tutorials every week. The course starts by discussing the question why some markets, in particular energy markets, need regulation and others not, Then, we discuss how the government could regulate these markets. These first meetings are meant to give the students some theoretical background in economic regulation. Afterwards, we discuss key issues in the daily practice of regulation: benchmarking on efficiency and the determination of the the appropriate reward (i.e. the WACC) on capital which is invested in the network. These questions are highly important for regulated firms as it affects how much profit they are allowed to make and to which extent they are able to finance the investments. Then, we go into in the question how to implement competition in energy markets. We discuss the design of electricity and gas markets on wholesale level and how these markets become more integrated on an international level. We also pay attention to how environmental regulation (like emissions trading and subsidies for renewables) can be designed and how this affects the electricity sector/market. In the final meeting, we pay attention to the retail energy market, discussing how competition can be implemented in markets where the demand is affected by factors like (perceived) switching costs and trust in retailers.
In most weeks, there will be assignments, which are discussed in the tutorials based on presentations by students. In addition, there will be a few extra tutorials where we recap the material and discuss questions of students. This course is part of the focus area 'Energy'. When you focus your MSc on energy subjects you will be awarded an official acknowledgement on your diploma, improving and broadening your career opportunities in the energy sector. Prerequisites are mentioned in the Teaching and Examiniation Regulations: 'Focus areas in the master programmes'.
Uren per week 4
Onderwijsvorm -gastcollege , gecombineerde hoor-/werkcolleges, werkcolleges
(1 guest lecture)
Toetsvorm -groepsopdracht,  -groepspresentatie,  -schriftelijk tentamen (open vragen)
(Determination of final grade: weekly assignments: max 20%; written exam: max 80%)
Vaksoort master
Coördinator prof. dr. M. Mulder
Docent(en) prof. dr. M. Mulder
Verplichte literatuur
Titel Auteur ISBN Prijs
Textbook Regulation of Energy Markets, Springer, free available for UG students via https://rd.springer.com/book/10.1007%2F978-3-030-58319-4 Mulder, M. 9783030583194
Entreevoorwaarden Open to all MSc students, but students are recommended to have some background in microeconomics and finance.
Opmerkingen Info: Prof. Machiel Mulder, e-mail machiel.mulder@rug.nl
Secretary: K. Beute; e-mail k.beute@rug.nl, room 5411.0734, phone +31(0)50 3637018
Opgenomen in
Opleiding Jaar Periode Type
Courses Exchange (MSc)  ( Courses Exchange Students (MSc) without limited access) 1 semester II b keuze
DD MSc Economics - Universidad de Chile, Santiago (1,5-jarig)  (keuzevakken voor studenten uit Chili) 2 semester II b keuze
DD MSc IFM - UCSC, Milan (2-year)  (electives DD MSc IFM - UCSC, Milan) 2 semester II b keuze
MSc BA - Change Management  (keuzevakken MSc BA Change Management) 1 semester II b keuze
MSc BA - Management Accounting and Control/MAC  (keuzevakken MSc BA MAC) 1 semester II b keuze
MSc BA - Small Business & Entrepreneurship/SB&E  (keuzevakken MSc BA SB&E) 1 semester II b keuze
MSc BA - Strategic Innovation Management/SIM  (keuzevakken MSc BA-SIM) 1 semester II b keuze
MSc Economic Development & Globalization / ED&G  (keuzevak(ken) B MSc ED&G) 1 semester II b keuze
MSc Economics  (keuzevakken A MSc Economics) 1 semester II b keuze
MSc Energy and Environmental Sciences  (Electives) 1 semester II b keuze
MSc Finance  (keuzevakken B MSc Finance) 1 semester II b keuze
MSc International Business & Management/IB&M  (keuzevakken B MSc IB&M) 1 semester II b keuze
MSc International Financial Management/IFM  (keuzevakken MSc IFM) 1 semester II b keuze
Msc Philosophy, Politics and Economics 1 semester II b keuze