Miguel Castro
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I am an Applied Economist (Energy, Environmental and Resource Economics) with rigorous economic modelling, statistical and mathematical software coding experience
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RESEARCH
Peer-reviewed publications
Is a Wetter Grid a Greener Grid? Estimating Emissions Offsets for Wind and Solar Electricity in the Presence of Large Hydroelectric Capacity. The Energy Journal 40(1) January 2019.
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I use random fluctuations in hourly wind and solar generation in California to estimate how much they reduce emissions of carbon dioxide, sulfur dioxide, and nitrogen oxides. These offsets depend on the direct displacement of high-cost natural gas generators, and on the hydropower reallocation that occurs to the hours with the lowest increase in renewable generation. Solar power daily intermittency shifts hydro from the afternoon to the evening, which increases its emissions offsets since the gas generators displaced in the evening are dirtier than those kept running in the afternoon. In contrast, wind offsets are less sensitive to hydropower reallocation, since it leads to a substitution of generators with similar emissions intensities. These findings highlight the importance of accounting for interactions between wind, solar, and hydro capacity in assessing their environmental benefits. Similar lessons will apply to electric grids with storage capacity.
Working papers
Timing is everything: Optimal Electric Vehicle Charging to Maximize Welfare. IDB Working Paper Series. 1066
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The new surge in electric vehicle (EV) charging in Texas can be served efficiently during the early morning hours with large wind generation, low electricity demand, prices, and environmental damages. I simulate the ERCOT wholesale electricity market and its environmental damages (CO2, SO2, NOx, and PM2.5) to find out how charging should be spread among hours to maximize welfare and the performance of different tariff schemes (hourly vs day-night and private vs social costs). The efficient charging schedule, incurring low costs and damages, is the opposite of current patterns: while users charge mostly in the evening (18-23 H), EVs should be charged during the first hours of the day (0-4 H). Constraining power withdrawals to the current Level 1 and 2 chargers reduces welfare gains since it limits using energy from those hours with lower prices and marginal damages. A day-night tariff reflecting social costs can achieve most of the gains of the first best, reducing carbon and air pollution damages below those of the current patterns.
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Intermittent Renewable Energy, Hydropower Dynamics and the Profitability of Storage Arbitrage. IDB Working Paper Series. 1107
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Solar and wind power intermittency increase wholesale price variation and create opportunities for arbitrage. I use the short term randomness of wind and solar generation to estimate the hourly reductions in wholesale electricity market prices (merit-order effect) in Mexico. However, since hydropower is already acting as battery storage by smoothing the hourly intermittency of wind and solar, I use lags to control for the reallocation, to estimate the appropriate dynamic merit-order effect and to project future wholesale prices for larger renewables capacities. Then, I use dynamic optimization to assess the profitability of energy arbitrage for a marginal storer. Storage profits based on market average wholesale prices for 2019 (10.6 GW of wind and solar) are lower than the levelized cost of batteries (LCOE). For the 2029 planned wind and solar capacities (30.9 GW), storage arbitrage profits would be within the range of its projected declining LCOE for a 4-hour battery. Nevertheless, for nodes with large price variances and not fully transmission congested, arbitrage storage would be within the range of the LCOE sooner by 2025 (25.4 GW). Pumped-storage hydro arbitrages power at a lower rate and has mature costs which make its arbitrage profits lower than those of the batteries. The full value of storage can be larger if we consider other services (e.g. frequency regulation). Similar lessons will apply to grids/countries with increasing shares of renewables and non-dominant hydropower.
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The variable value of renewable energy
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The value of renewable energy comes from reducing grid-level electricity generation costs and emissions. However, these benefits depend on the wind capacity, fossil fuel prices and demand levels. I assess the marginal value of wind power in Texas (ERCOT) using two methods: reduced form econometrics, based on observed prices and marginal damages estimated with exogenous hourly wind variation, and a partial equilibrium electricity market model. I decompose how the two components of the marginal value of wind, market and environmental, respond to changes in total wind capacity, the ratio of coal to gas prices and demand. From 2011-2017, the marginal value of wind had a downward trend but with a zigzag shape displaying even an increasing value for certain periods due to raises in demand, natural gas prices and emissions offsets. Overall, the marginal value has declined to slightly below its levelized cost.
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High frequency and intermittency, higher profits or value? The economic value of energy storage arbitraging 15-minute electricity prices under increasing wind power.
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Scaling up intermittent renewable energy requires storage for dealing with intermittent output. Wholesale prices provide the key signals for arbitrage opportunities. I assess the profitability and value of a marginal entrant storer in Texas (ERCOT) using a structural econometric model for all different generation types and prices, and a reduced form specification for the marginal carbon and air pollution damages (CO2, SO2, NOx, and PM2.5). The market value or profits of storage increase with larger wind capacities since the larger intermittency leads to larger 15-minute price differences. Nevertheless, larger wind capacities will decrease their related emissions offsets and economic value. I show how the charging profile, profits and value vary under different scenarios combining emissions taxes, coal to gas price ratios and load.
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Work-in-Progress
*Distributed storage arbitrage with electric vehicles in ERCOT.
*Utility scale vs distributed renewable systems: How tariff schemes play a central role determining the efficient mix.
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*Merit order effect of intermittent renewables in hydropower dominated systems. Assessing the impact of wind and solar power in Brazil.
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*Cost Effective Electric Vehicle Charging for Transportation in Mexico.
*Projecting the value and profitability of renewables: Structural econometric models vs Machine learning for assessing wholesale electricity prices.
*A Fair Differentiated Carbon Tax. Understanding the Role of Cumulative Historical Emissions and Uneven Impacts between Countries.
Books and reports
Castro, M. (2011). Hacia una matriz energética diversificada en Ecuador. Quito: CEDA.
Castro, M. (2011). Una valoración económica del almacenamiento de agua y carbono en los bofedales de los páramos ecuatorianos-la experiencia en Oña-Nabón-Saraguro-Yacuambi y el Frente Suroccidental de Tungurahua. EcoCiencia. Wetlands International/UTPL/MAE. Quito: Integraf.
Albán, M. A., Breda, T., Castro, M., & Chíu, M. Hildahl, K., Honty, G., Larrea, C. (2012) ¿Estamos en transición hacia un país pospetrolero? Quito: CEDA.
Castro, M., Sierra, R., Calva, O., Camacho, J., López, F., & Lozano, P. (2013). Zonas de Procesos Homogéneos de Deforestación del Ecuador. Factores promotores y tendencias al 2020. Obtenido de https://www. researchgate. net.
Sitting papers
Managing Biological Pollution with Trade Flows in Mind: An Endogenous Epidemiological-Economic Geography (with Richard Horan and Christopher Wolf).
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We explore how importer responses to private biological risks can alter trade flows into a region, and also across regions as a result of risk and price feedbacks, along with regional changes in the scale of production. Additionally, we explore how policy tools such as surveillance efforts might be allocated efficiently across the landscape to account for risks and associated feedbacks. In particular, we illustrate how policies that help one region may affect others, with long-run implications for how the entire ecological-economic pattern of risks evolves.
Our particular application involves a numerical simulation of cattle trade within the United States. Two types of diseases are examined to explore the role of epidemiological characteristics: a slow-moving disease such as bovine tuberculosis (bTB), and a fast-moving disease such as foot and mouth disease (FMD).
TEACHING
Spring 2018: Instructor: Ecological Economics, EEP 255
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Spring 2016: Instructor: Natural Resource Economics, EEP 460 (Syllabus)
ABOUT ME
Lifelong learner
Spanish - Mother Tongue
I enjoy playing guitar and dancing