Browsing by Author "Meade, Richard"

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Open Access
Alternating Currents or Counter-Revolution? Contemporary Electricity Reform in New Zealand, VUW Press 2005 , 1-346
(Te Herenga Waka—Victoria University of Wellington, 2009) Evans, Lewis; Meade, Richard
The authors place New Zealands current institutional arrangements for its electricity sector within the context of successive waves of economic reform. They compare these arrangements with developments internationally, drawing together lessons for future policymaking both in New Zealand and overseas. This book is a work of political economy that carefully analyses the interplay between technology, economics and politics that has at different times driven the sector. Controversially, the authors argue that the market reforms of the 1980s and 1990s provided greater supply security than the more centralised arrangements that prevailed in the past - and that New Zealands reversion to more centralised and political control since the late 1990s has resulted in an unsustainable half-way house that hinders private electricity investment and reinforces this trend. Themes of the book are: Does electricity sector liberalisation help politicians, power companies and consumers? Will central planning or market forces be more likely to ensure supply security? Is regulation or ownership the best way to protect consumers from electricity monopolies? Can electricity reforms succeed with centralised transmission planning? What can be learned from 20 years of electricity reform in New Zealand?
Open Access
Climate Changes Stock-take and Appraisal
(Te Herenga Waka—Victoria University of Wellington, 2007) Meade, Richard
Richard Meade presented Climate changes stock-take and appraisal at The Journalists Training Organisation Courses hosted by Victoria University Continuing Education and Executive Development.
Open Access
Comparison of Long-Term Contracts and Vertical Integration in Decentralised Electricity Markets
(Te Herenga Waka—Victoria University of Wellington, 2009) Meade, Richard; O'Connor, R. Seini
Decentralised electricity systems require effective price and quantity risk management mechanisms but the nature of such systems poses particular problems for satisfying those requirements. Among these problems are investment hold-up risks rooted in the competition facing both electricity retailers and large industrial firms. Additional problems include those of load profile information and bargaining mismatches between generators and customers. Significantly hold-up risks exist not only between retailers and generators but also affect (e.g. fuel) suppliers upstream of generators. Contracts are one means of addressing such problems and represent a particular improvement on spot market trading alone. However we argue that market contracting in electricity systems is a costly approach to addressing hold-up and related problems and that internal organisation (i.e. vertical integration) is a more efficient alternative minimising the overall costs of market contracting and ownership. Not only does integration internalise wholesale market risks and market power costs to the integrated firm thereby reducing their importance it also reduces the need for and efficacy of regulation to constrain generator market power. It furthermore thins contract markets reducing the threat of generator hold-up from competitive retail entry and otherwise supports generation investment and hence supply security. While the reinstatement or retention of retail franchise areas is one possible solution to the problems of contracting it is arguably unnecessary if there are other system features (such as transmission constraints) impeding retail entry. This is particularly so in systems involving vertical integration although even then policy makers are confronted with a trade-off between promoting retail competition and facilitating generation investment and supply security requiring judgement as to the optimal degree of retail market power. While vertical integration is a more natural and self-sustaining solution to electricity sector problems it too is only a partial solution leaving complementary roles for spot and long-term contract markets.
Open Access
Comparison of Long-Term Contracts and Vertical Integration in Decentralised Electricity Markets
(Te Herenga Waka—Victoria University of Wellington, 2009) Meade, Richard; O'Connor, R. Seini
Open Access
Competition bad, less competition better? How industry structure and competition affect investment and welfare in infrastructure industries
(Te Herenga Waka—Victoria University of Wellington, 2011) Meade, Richard
Competition is often seen as important for improving investment incentives and consumer welfare particularly in deregulated infrastructure industries like electricity gas water and telecommunications. Richard Meade presents research on how industry structure and competition interact to affect investment and welfare in imperfectly competitive environments. Relevant features of industry structure include vertical integration/separation legal unbundling and the presence of forward contracts and wholesale markets. He highlights situations in which reduced competition and sometimes outright anti-competitive behaviour is associated with improvements in investment and welfare. Also some industry arrangements can favour investment while harming welfare. While this varied landscape complicates the tasks of policymakers regulators and competition authorities lessons are drawn to help them identify the relevant trade-offs and selected New Zealand applications are discussed.
Open Access
Competition Policy versus Regulation in Electricity Systems - Determining the Boundary
(Te Herenga Waka—Victoria University of Wellington, 2008) Meade, Richard
Competition policy is typically intended to protect competition where workable competition is possible. Conversely regulation can either preclude competition or can act as a substitute for competition when workable competition is impossible. Both types of policy can have a significant impact on investment which in turn affects the evolution (or demise) of competition. This means competition and regulation settings can affect each other and potentially their own rationale. Electricity systems have particular competition and regulation issues and challenges and industry changes such as New Zealand's vertical integration of generation and energy retailing present additional complexities.In this seminar Richard Meade argues that there is no single optimal boundary between competition policy and regulation in electricity systems. Instead any such boundary will evolve over time reflecting a myriad of factors such as institutional endowments industry reform paths the extent of state ownership and changing technologies. Importantly the optimal boundary will differ from that prevailing in other network industries such as telecommunications suggesting that appropriate competition and regulatory policies will differ across industries.
Open Access
Continuous Disclosure: Some Background
(Te Herenga Waka—Victoria University of Wellington, 2006) Meade, Richard
Richard Meade presented Continuous Disclosure: Some Background at the Continuous Disclosure workshop held in June 2006.
Open Access
Decentralization and Re-centralization of Electricity Industry Governance in New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2004) Meade, Richard
For much of the twentieth century electricity generation and transmission in New Zealand was dominated by centralized state ownership and control with local authority ownership of distribution and retailing. Radical reform of the sector commenced in the early 1980s with the progressive corporatisation and unbundling of these sub-sectors limited privatizations and a shift towards "light-handed" non-industry specific regulation. These reforms contained inherent tensions that quickly manifested themselves in a political stand-off over the electricity price path required to support new generation investment. In turn this standoff spurred the industry-led development of a voluntary self-governing wholesale electricity market. With a change of government in 1999 increasing re-centralization of industry governance and regulation resulted in part justified on the grounds of winter power "crises" in 2001 and 2003 involving significant wholesale electricity price spikes (although blackouts were a regular and more disruptive occurrence prior to the reforms). With the return to centralized industry governance and shift towards heavy-handed regulation - but now with greater private sector investment in the sector - system supply and security issues persist and questions remain over the likely effect of these policy reversals on required new investment.
Open Access
Economic Analysis of Financial Transmission Rights (FTRs) with Specific Reference to the Transpower Proposal for New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2001) Evans, Lewis; Meade, Richard
Setting aside certain complications that can arise due to market power it is a relatively straightforward matter to derive (if not implement) a valuation formula for FTRs and to relate FTR valuation with the proceeds of the FTR auction allowing for both taxation and auction efficiency. If the FTR auction is fully efficient and/or if FTR revenues and costs were not taxable then not only would FTR values be maximised but the revenues to grid-connected parties from that auction would also be maximised. The seemingly odd result that FTR auction efficiency affects FTR values flows from the fact that the latter benefit from a tax deduction on FTR acquisition costs which deduction is maximised under a fully efficient FTR auction.
Open Access
An Economic Appraisal of Ngai Tipu Whakaritorito: A New Governance Model for Māori Collectives
(Te Herenga Waka—Victoria University of Wellington, 2004) Meade, Richard
Interest in the governance of Māori collectives has grown considerably over the past decade as significant settlements have been made between the Crown and various tribes (iwi) under the Treaty of Waitangi and also as Māori collectives take an increasing role in providing social service delivery on behalf of government to Māori communities. Māori collectives pose complex challenges in the design of optimal governance systems given the many overlapping roles and relationships assumed by individual collective members and cultural dimensions of Māori organisation typically based predominantly around lineage and social standing. The Māori Development Ministry Te Puni Kokiri like other agencies argues that the wide range of governance entities currently used by Māori collectives for their various economic social political and cultural activities each have inadequacies that are exposed in the Māori collective context. It has proposed a new governance entity that it claims better meets the requirements of such collectives. This paper briefly describes and analyses the Māori collective governance problem from the perspective of the economics of governance and provides an appraisal of Te Puni Kokiri's proposal in this light. It is argued that the proposed new governance entity offers little more than existing available options and in fact may not be meeting any particular deficit in the governance framework for Māori collectives or otherwise. Standard and cooperative companies are shown to be more suitable for Māori collective governance than often thought. For the Te Puni Kokiri proposal to materially add to the governance options available to Māori collectives it will be important to consider it in the light of forthcoming proposals for assisting Māori collectives to establish their mandate and "voice."
Open Access
Effect of Changes in Regulatory Quality on Electricity Lines Investment and Reliability in New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2007) Tremewan, James; Meade, Richard
Various studies indicate a negative relationship between investment on the one hand and regulation reduced regulatory quality and increased regulatory uncertainty on the other. Shifts to a proportional representation form of government or to incentive regulation are specifically argued to reduce investment. Boyle and Guthrie (2003) however predict an ambiguous relationship between investment and uncertainty. Electricity lines (i.e. distribution) companies in New Zealand have experienced multiple regulatory innovations over 1990-2005 all of which could be predicted to reduce investment and thereby service reliability rates. We find however that investment and reliability rates have in fact increased over this period contrary to this prediction. Part of this increase in investment rates is explicable in terms of rising demand and electricity prices and declining capital goods prices. Yet we find a positive structural break for investment in 1995 and for reliability in 2000. We interpret these results as indicating that considerable investment uncertainty relating to wider electricity sector reforms and particularly to distribution sector reforms over 1989-1995 resulted in lines companies deferring investment in this period. With the final removal of franchise areas on 1 April 1994 the nature and extent of lines company competition became apparent resolving the preceding investment uncertainty. Any adverse impacts of subsequent regulatory innovations on otherwise increased investment and reliability rates were not identified by our analysis. We leave it to future research to demonstrate the deferral of lines company investment over the late 1980s and early 1990s.
Open Access
The Effect of Industry Structure and Institutional Arrangements on Growth and Innovation in the New Zealand Agriculture Sector
(Te Herenga Waka—Victoria University of Wellington, 2007) Evans, Lewis; Meade, Richard
How do industry structures and other institutional arrangements affect growth and innovation in the New Zealand agricultural sector? Put another way how can those structures and arrangements be improved to better facilitate growth and innovation in the New Zealand agricultural sector? Addressing such questions is the ambitious aim of this report.
Open Access
Electricity Investment and Security of Supply in Liberalized Electricity Systems
(Te Herenga Waka—Victoria University of Wellington, 2005) Meade, Richard
Eliciting generation investment by decentralized profit-seeking private investors is a key goal of electricity liberalization. Debate rages regarding the ability of energy-only electricity markets to ensure that such investors provide generation investment as and when needed to ensure "the lights stay on."Many argue that despite theoretical predictions to the contrary energy-only markets will under-provide the requisite level of investment due to market imperfections that are either inherent (such as consumer resistance to real-time pricing) or imposed (such as price caps to curtail market power). Thenature of these imperfections is increasingly being debated with security of supply formerly being regarded as a public good but later analysis showing this is not the case (or even if it were why that need not necessitate intervention). Greater attention is now being paid to externalities associated with the provision of security of supply but evidence on the importance of such externalities is yet to be presented. Similarly lacking is evidence on the superiority of mechanisms often proposed or implemented to encourage investment in generation capacity where energy-only markets are thoughtto elicit inadequate investment. These mechanisms include capacity payments capacity obligations options-based capacity schemes and capacity subscriptions with load-limiting fuses. While the latter are argued to represent an elegant and non-distortionary means to encourage market-based securityof supply the other alternatives are shown to be conditionally optimal at best and in principle and practice subject to self-defeating features that can be bettered by refinements to energy-only market arrangements (greater demand-side responsiveness) and structural measures (vertical integration ofgeneration and energy retailing). By instead pursuing these alternative measures security of supply is more easily achieved electricity prices are less vulnerable to exploitation of generator market power and generation investment is more likely to arise. The need for price caps which then necessitate compensatory capacity mechanisms to elicit investment is then reduced. At the same time exposure to regulatory risk is lessened. Combining these measures with greater political and regulatory restraint is argued to provide a more stable and superior means to elicit the investment needed to provide the socially optimal security of supply addressing any market imperfections at source rather than introducing new mechanisms at least as much at risk of imperfection. The use of capacity mechanisms is argued to increase the risk that energy-only markets will fail to perform as expectedand required undermining the liberalisation process. As such they raise the prospect that governments and regulators concerned about security of supply will once again find themselves responsible for achieving it at consumers' and/or taxpayers' expense but with lesser prospect of success.
Open Access
Forest and Forest Land Valuation - How to Value Forests and Forest Land to Include Carbon Costs and Benefits
(Te Herenga Waka—Victoria University of Wellington, 2009) de Braganca, Gabriel Fiuza; Lu, Yinjia (Andrea); Meade, Richard
Presentation by Richard Meade to the AARES 53rd Annual Conference held 10-13 February 2009 in Cairns Australia.Forest and Forest Land Valuation - How to Value Forests and Forest Land to Include Carbon Costs and Benefits.
Open Access
Grid Characteristics and the Interface Between Competition and Regulation Policies
(Te Herenga Waka—Victoria University of Wellington, 2008) Meade, Richard
This presentation explores the demarcation of this boundary and how it is affected by grid characteristics as a first step towards an ongoing comparative analysis of the institutional dynamics of competition and regulation policies in the electricity sector (for presentation at IAEE 2008)
Open Access
The Impact of Climate Change Policy on Forest Value and Dairy Conversion Rates
(Te Herenga Waka—Victoria University of Wellington, 2006) Meade, Richard
The conversion of forest land into dairy farms has recently increased worsening New Zealand's greenhouse gas emissions under the Kyoto Protocol. Climate change policies can affect both forest value and optimal forest management as they relate to and affect future decisions regarding the conversion of forest land into dairying. These decisions are also affected by uncertainty in climate change policy and uncertainties in the prices of timber milk and carbon dioxide. Conventional discounted cash flow valuation techniques cannot model these contingent future decisions and uncertainties so an alternative valuation approach based on real options techniques is required. This shows that climate change policies either adopted or being considered in New Zealand do indeed affect both forest value and the rate at which forests are likely to be converted into dairying but not always as expected.
Open Access
Intervention in Electricity Investment: Required, or Self Perpetuating?
(Te Herenga Waka—Victoria University of Wellington, 2005) Meade, Richard
Richard Meade presented Intervention in Electricity Investment: Required, or Self Perpetuating? at an ISCR seminar in December 2005. The book Richard Meade has co-authored with Lewis Evans on the topic, Alternating Currents or Counter Revolution? Contemporary Electricity Reform in New Zealand is now out.
Open Access
Intra-Country Regulation of Share Markets: Does One Size Fit All?
(Te Herenga Waka—Victoria University of Wellington, 2005) Boyle, Glenn; Meade, Richard
A large body of evidence suggests that investor protection regulationassists the development of major stock exchanges but this leaves openthe question of whether or not the same level of regulation should beapplied to all centralised trading platforms. Allowing for regulatoryvariation permits a wider choice of investment opportunities for liquidity conscious investors lowers some firms' cost of capital and enhancesplatform competition while potentially negative spillover mechanismslack both theoretical credibility and empirical support. Overalluniformity in investor protection regulation seems designed to provide anexpensive solution to a doubtful problem.
Open Access
The Multinationalisation of New Zealand Agri-Businesses: Drivers, Implications, Issues and Opportunities
(Te Herenga Waka—Victoria University of Wellington, 2007) Meade, Richard
Richard Meade presented The Multinationalisation of New Zealand Agri-Businesses: Drivers Implications Issues and Opportunities In Wellington on 6 December 2007. A recent report by Lew Evans and Richard Meade for MAF* highlights that New Zealand's major agricultural sectors are increasing their offshore production capacity. This trend reflects a subtle shift in the nature of New Zealand's agricultural comparative advantage with a greater contribution now from intellectual property. The multinationalisation of New Zealand Agri-Businesses offers a range of benefits including improved market access a reduced carbon footprint and reduced exposure to adverse exchange rates. In this seminar the drivers and implications of this changing strategy are explored as are obstacles to its further development (particularly in relation to cooperative food processors) and opportunities it presents.To view the report this presentation refers to click here.
Open Access
One Size Fit All? Investor Protection Regulation in Financial Markets
(Te Herenga Waka—Victoria University of Wellington, 2005) Boyle, Glenn; Meade, Richard
Professor Glenn Boyle presented One Size Fit All? Investor Protection Regulation in Financial Markets at this seminar in May 2005.