Restructuring the Electricity Industry

Anette Boom, Stefan Buehler

Research output: Working paperResearchpeer-review

Abstract

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.
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.
LanguageEnglish
Place of PublicationFrederiksberg
PublisherCopenhagen Business School, CBS
Number of pages42
StatePublished - 2014
SeriesWorking Paper / Department of Economics. Copenhagen Business School
Number2-2014

Keywords

    Cite this

    Boom, A., & Buehler, S. (2014). Restructuring the Electricity Industry. Frederiksberg: Copenhagen Business School, CBS. Working Paper / Department of Economics. Copenhagen Business School, No. 2-2014
    Boom, Anette ; Buehler, Stefan. / Restructuring the Electricity Industry. Frederiksberg : Copenhagen Business School, CBS, 2014. (Working Paper / Department of Economics. Copenhagen Business School; No. 2-2014).
    @techreport{0f61c9e7f9134665a6beca554c88aa7b,
    title = "Restructuring the Electricity Industry",
    abstract = "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.",
    keywords = "Electricity, Investments, Generating Capacities, Vertical Integration, Monopoly and Competition",
    author = "Anette Boom and Stefan Buehler",
    year = "2014",
    language = "English",
    publisher = "Copenhagen Business School, CBS",
    address = "Denmark",
    type = "WorkingPaper",
    institution = "Copenhagen Business School, CBS",

    }

    Boom, A & Buehler, S 2014 'Restructuring the Electricity Industry' Copenhagen Business School, CBS, Frederiksberg.

    Restructuring the Electricity Industry. / Boom, Anette; Buehler, Stefan.

    Frederiksberg : Copenhagen Business School, CBS, 2014.

    Research output: Working paperResearchpeer-review

    TY - UNPB

    T1 - Restructuring the Electricity Industry

    AU - Boom,Anette

    AU - Buehler,Stefan

    PY - 2014

    Y1 - 2014

    N2 - 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.

    AB - 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.

    KW - Electricity

    KW - Investments

    KW - Generating Capacities

    KW - Vertical Integration

    KW - Monopoly and Competition

    M3 - Working paper

    BT - Restructuring the Electricity Industry

    PB - Copenhagen Business School, CBS

    CY - Frederiksberg

    ER -

    Boom A, Buehler S. Restructuring the Electricity Industry. Frederiksberg: Copenhagen Business School, CBS. 2014.