Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction

Anette Boom, Stefan Buehler

Publikation: Bidrag til konferencePaperForskningpeer review

Resumé

We study the role of vertical structure in determining generating capacities, retail prices, and welfare in the electricity industry. Welfare is maximized if market liberalization is combined with vertical separation. The driving force behind this result is the risk of rent extraction faced by competing integrated generators, which induces excessively high investments and retail prices. Under vertical separation, retailers set lower retail prices and generators invest less, thereby driving up wholesale prices and shifting rents from retailers to generators. Vertical integration may be desirable, though, if supply security is at stake.
We study the role of vertical structure in determining generating capacities, retail prices, and welfare in the electricity industry. Welfare is maximized if market liberalization is combined with vertical separation. The driving force behind this result is the risk of rent extraction faced by competing integrated generators, which induces excessively high investments and retail prices. Under vertical separation, retailers set lower retail prices and generators invest less, thereby driving up wholesale prices and shifting rents from retailers to generators. Vertical integration may be desirable, though, if supply security is at stake.

Workshop

Workshop9th Swedish Workshop on Competition & Public Procurement Research
Nummer9
LokationSwedish Competition Authority
LandSverige
ByStockholm
Periode02/11/201702/11/2017
Internetadresse

Bibliografisk note

CBS Bibliotek har ikke adgang til materialet

Citer dette

Boom, A., & Buehler, S. (2017). Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction. Afhandling præsenteret på 9th Swedish Workshop on Competition & Public Procurement Research, Stockholm, Sverige.
Boom, Anette ; Buehler, Stefan. / Restructuring the Electricity Industry : Vertical Structure and the Risk of Rent Extraction. Afhandling præsenteret på 9th Swedish Workshop on Competition & Public Procurement Research, Stockholm, Sverige.37 s.
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Boom, A & Buehler, S 2017, 'Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction' Paper fremlagt ved 9th Swedish Workshop on Competition & Public Procurement Research, Stockholm, Sverige, 02/11/2017 - 02/11/2017, .

Restructuring the Electricity Industry : Vertical Structure and the Risk of Rent Extraction. / Boom, Anette; Buehler, Stefan.

2017. Afhandling præsenteret på 9th Swedish Workshop on Competition & Public Procurement Research, Stockholm, Sverige.

Publikation: Bidrag til konferencePaperForskningpeer review

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AU - Buehler,Stefan

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N2 - We study the role of vertical structure in determining generating capacities, retail prices, and welfare in the electricity industry. Welfare is maximized if market liberalization is combined with vertical separation. The driving force behind this result is the risk of rent extraction faced by competing integrated generators, which induces excessively high investments and retail prices. Under vertical separation, retailers set lower retail prices and generators invest less, thereby driving up wholesale prices and shifting rents from retailers to generators. Vertical integration may be desirable, though, if supply security is at stake.

AB - We study the role of vertical structure in determining generating capacities, retail prices, and welfare in the electricity industry. Welfare is maximized if market liberalization is combined with vertical separation. The driving force behind this result is the risk of rent extraction faced by competing integrated generators, which induces excessively high investments and retail prices. Under vertical separation, retailers set lower retail prices and generators invest less, thereby driving up wholesale prices and shifting rents from retailers to generators. Vertical integration may be desirable, though, if supply security is at stake.

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Boom A, Buehler S. Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction. 2017. Afhandling præsenteret på 9th Swedish Workshop on Competition & Public Procurement Research, Stockholm, Sverige.