Karthik Murali

541-737-3995

karthik.murali@oregonstate.edu

Faculty

Karthik Murali

Overview

Publications

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“Informal Cross-Border Trade in Africa: Operations, Policy, and Opportunities”

Informal cross-border trade (ICBT) refers to the illegal activities of cross-border commerce conducted by unregistered small-scale traders. We seek to develop insights to understand the ICBT value chain and offer policy recommendations to successfully integrate it into the formal economy. Using a game-theoretic model, we analyze the operations and key market dynamics of ICBT. We analyze the policy implications of three representative UN directives: enhancing marginalized traders' access to formal channels, reducing export tax rates for formal traders, and introducing an alternative simplified trade regime (STR) for informal traders. All three policies result in an increase in government proceeds when the inherent profitability of the formal or STR channels is sufficiently high. Furthermore, social welfare increases when the policies effectively balance wholesale price competition within the formal and informal channels. We apply our model to a case study based on Uganda's agricultural exports over an 11-year horizon. The access enhancement policy is most effective in increasing government proceeds but least effective in improving the welfare of other participants. The tax reduction policy enhances traders' profitability but sacrifices the welfare of farmers and government proceeds substantially. Finally, the STR acknowledgement policy results in the largest increase in profitability of marginalized traders and farmers but comes at the cost of government proceeds.

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“Drivers and Implications of Combined Investment in Renewables and Energy Storage in the Residential Sector”

Residential consumers are increasingly combining renewables with energy storage systems. However, changes in policies and support for these technologies may impact their adoption and the outlook for the energy industry. In this paper, we consider a grid-connected household's problem of determining the optimal capacities of these two technologies as well as the battery operating policy that minimizes its electricity costs when faced with time-of-use electricity prices and sellback credits. We identify the impact of household characteristics, technological progress, and electricity pricing policies on the levels of investment in these two technologies. Furthermore, we supplement our analytical results with a case study of two U.S. cities and identify policy guidelines for the design of a technology subsidy program aimed at stimulating the adoption of these technologies and the ensuing implications for residential customers, the environment, and grid reliability. Our paper has implications for several stakeholders in practice on (i) how the adoption of renewables is affected by energy storage (and vice versa) and (ii) how electricity pricing, technological progress, and subsidy policies can shape the adoption of both technologies.

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“The Impact of heterogeneity in consumer characteristics on the design of optimal time-of-use tariffs”

Unlike commercial and industrial sectors where they have been successfully deployed, the rollout of voluntary Time-of-Use (TOU) tariffs in the residential sector has been tepid. One cause for this limited penetration of TOU tariffs in the residential sector is the difficulty in offering appropriate price incentives to a consumer class that is heterogeneous in its demographics and preferences. In this paper, we develop a parsimonious game-theoretic model to shed light on the optimal pricing problem from the utility's perspective when its consumers vary in their electricity consumption scheduling preferences as well as their willingness or flexibility to shift consumption in response to price incentives offered by the utility. Using this model, we generate structural insights into the role of the two types of consumer heterogeneity on the design and potential of voluntary TOU tariffs. We also show how our model and insights can be used to evaluate the current state and potential of TOU tariffs in two U.S. states.

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“Why have Voluntary Time-of-Use Tariffs Fallen Short in the Residential Sector?”

We investigate the causes behind the underwhelming adoption of voluntary Time-of-Use (TOU) tariffs in the residential electricity market. TOU tariffs are deployed by utilities to better match electricity generation capacity with market demand by giving consumers price incentives to reduce their consumption when electricity demand is at its peak. However, consumers in residential electricity markets are heterogeneous in their consumption preferences. Hence, utilities face a trade-off when deploying voluntary TOU tariffs---to provide aggressive price incentives that will only appeal to consumers with flatter profiles or milder incentives to appeal to a larger proportion of the market. Using a game-theoretic model, we identify the key factors that determine the viability of voluntary TOU tariff deployment. On the supply side, the gap between wholesale prices in the peak and off-peak periods determines how much the utility stands to benefit by inducing demand response. On the demand side, heterogeneity within target consumer sets determines how much demand response the utility can induce with a certain price incentive. We show that misaligned incentives between utilities and regulators lead to underwhelming TOU tariff adoption compared to the socially desirable level, and that this under-adoption is worse when consumption preferences are uniformly distributed. We also evaluate the degree of cross-subsidization across tariff structures to identify their implications for equity among the different consumer types, and find that low levels of voluntary TOU adoption are less equitable than the default tariffs.

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“The Effects of Ecolabels and Environmental Regulations on Green Product Development”

Problem definition: We develop a framework for studying the impact of voluntary ecolabels and mandatory environmental regulation on green product development among competing firms. Academic/practical relevance: We contribute to the academic literature on environmental quality competition by explicitly accounting for the credibility of environmental claims made by firms, and by exploring the implications for society of two mechanisms used to remedy credibility-related consumer discounting of firms’ self-declared environmental qualities. We draw parallels between our findings and instances of environmental labeling and regulation from industry to highlight the practical implications of our study. Methodology: We use a game-theoretic framework to analyze a consumer-driven model of green product development. Results: Credibility asymmetry drives product differentiation between two competing firms. The less credible firm always adopts external certification, while the more credible firm does so only if its credibility is sufficiently low. Credibility may also determine whether or not the government should intervene. In the absence of an external certifier, the regulator should intervene by imposing a mandatory environmental standard that is decreasing in stringency as the credibility of the more credible firm increases. In the presence of a certifier, the regulator should intervene if neither firm is sufficiently credible, or if consumers do not value environmental stewardship highly. Managerial implications: We identify how and when government should (and should not) intervene to stimulate green product development when competing firms can use self-labels or external certifications to communicate their environmental performance to consumers. We also determine the optimal strategies for the competing firms and external certifiers.

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“Municipal Groundwater Management: Optimal Allocation and Control of a Renewable Natural Resource”

We study a municipal groundwater management problem to determine optimal allocation and control policies in the presence of water transfer opportunities. We establish and characterize threshold polices governing export or import decisions of a given municipality. In the spirit of the Triple Bottom Line (3BL), we ascertain that exporting (importing) water through a water market defined by an exogenous export/import price is detrimental (beneficial) to both society and the environment within the municipality. In contrast, fixed quantity trading between two municipalities defined by an endogenously negotiated export/import price can have positive as well as negative impacts from a global 3BL perspective. In particular, typical trading scenarios that occur between municipalities can be detrimental to the environment. We also study the implications of privatization, and find that a privatized municipality would be more (less) likely to export (import) water as compared to its non‐privatized counterpart, resulting in negative implications for society within the municipality. However, if exports are banned, privatization can benefit the environment by mitigating the damage caused by the extraction differential, a phenomenon analogous to the green paradox. Moreover, careful and restricted privatization of municipalities can lead to positive global 3BL impacts from fixed quantity trading.

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“Strategic Sell-by Dates and Implications for Food Waste”

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“Watt’s Next: Navigating the Surge in Electric Vehicle Adoption and its Implications for Grid Operations”

As policy decisions pave the way for more Electric Vehicles (EVs) on the road, there is expected to be a tremendous strain on the utility grid. Managing this strain requires careful planning for (and possibly control of) EV charging. This may include the utility firm managing intra-day demand variations using grid-scale batteries, and influencing the charging operations of some fraction of EVs (via active or passive managed charging program), including the possible use of Vehicle-to-Grid (V2G) technologies. A managed charging program must be carefully designed, accounting for EV users' driving patterns and range anxieties. In this paper, we take the perspective of an integrated energy system planner, who seeks to minimize generation and emissions costs arising from the electricity and transpotation sectors. Using a stylized analytical model that considers two periods per day (peak and off-peak), we derive optimal grid operations in the presence of a fraction of EV owners who sign up to a managed charging program. We characterize the optimal operating policy and show that EVs and grid-scale batteries can be substitutes or complements in the energy planner's portfolio. We demonstrate the validity of all our findings numerically using a higher fidelity 24-hour model calibrated to real data from the PJM interconnection. Our results suggest that a long-term outlook on navigating EV adoption should focus on managing more EV charging, rather than installing a lot of stationary battery capacity or promoting V2G.

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“The value of strategic management of residential energy storage using a two-threshold control policy”

While the deployment of renewable energy sources as an alternative to fossil fuels has garnered global attention, the intermittent and unpredictable nature of renewables has spurred a growing interest in energy storage. However, effective management of energy storage is far from trivial for residential consumers owing to various compensation and pricing structures, as well as uncertainties in electricity demand and generation. In this paper, we consider a grid-connected residental consumer facing two-part time-of-use tariffs and sellback compensation. We propose an effective battery operating policy utilizing two thresholds --- a ``purchase up-to'' threshold in the off-peak period and a ``sell down-to'' threshold in the peak period. Through a full-factorial numerical experiment, we show that this simple control policy can substantially increase the value of home energy storage while performing nearly as well as battery optimization under certainty, thus leaving little room for improvement from more complex, forecast-driven approaches. From a policy perspective, our results indicate that imposing restrictions on the purchase of electricity from the grid to charge the battery is counter-productive to the adoption of this technology and the health of the grid and environment. In addition, through case studies of U.S. cities, we show that strategically managing home energy storage makes this technology significantly more attractive even in communities where it would add no value when managed passively. Furthermore, real-world implementation in a community setting validates the effectiveness and robustness of the battery management policy established in this paper, highlighting its resilience to changes in billing and compensation plans. Our findings provide valuable insights into the effective utilization of residential energy storage systems under evolving regulatory and market conditions.

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