Restructuring the Electricity Industry

Anette Boom, Stefan Buehler

Publikation: Working paperForskningpeer review

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Abstrakt

We study the role of vertical structure in determining generating capacities and retail prices in the electricity industry. Allowing for uncertain demand, we compare three market configurations: (i) integrated monopoly, (ii) integrated duopoly with wholesale trade, and (iii) separated duopoly with wholesale trade. We find that equilibrium capacities and retail prices are such that welfare is highest (lowest) under separated (integrated) duopoly. The driving force behind this result is the risk of rent extraction faced by competing integrated generators on the wholesale market. Our analysis suggests that vertical structure plays an important role in determining generating capacities and retail prices.
OriginalsprogEngelsk
Udgivelses stedFrederiksberg
UdgiverCopenhagen Business School, CBS
Antal sider42
StatusUdgivet - 2014
NavnWorking Paper / Department of Economics. Copenhagen Business School
Nummer2-2014

Emneord

  • Electricity
  • Investments
  • Generating Capacities
  • Vertical Integration
  • Monopoly and Competition

Citationsformater

Boom, A., & Buehler, S. (2014). Restructuring the Electricity Industry. Copenhagen Business School, CBS. Working Paper / Department of Economics. Copenhagen Business School, Nr. 2-2014