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

Anette Boom, Stefan Buehler

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

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
Number9
LocationSwedish Competition Authority
CountrySweden
CityStockholm
Period02/11/201702/11/2017
Internet address

Bibliographical note

CBS Library does not have access to the material

Cite this

Boom, A., & Buehler, S. (2017). Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction. Paper presented at 9th Swedish Workshop on Competition & Public Procurement Research, Stockholm, Sweden.
Boom, Anette ; Buehler, Stefan. / Restructuring the Electricity Industry : Vertical Structure and the Risk of Rent Extraction. Paper presented at 9th Swedish Workshop on Competition & Public Procurement Research, Stockholm, Sweden.37 p.
@conference{c4f189d02be54a39b149c07666185a31,
title = "Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction",
abstract = "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.",
author = "Anette Boom and Stefan Buehler",
note = "CBS Library does not have access to the material; null ; Conference date: 02-11-2017 Through 02-11-2017",
year = "2017",
language = "English",
url = "http://www.konkurrensverket.se/forskning/konferenser-och-seminarier/Swedish-workshop-on-competition-and-procurement--research/",

}

Boom, A & Buehler, S 2017, 'Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction' Paper presented at, Stockholm, Sweden, 02/11/2017 - 02/11/2017, .

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

2017. Paper presented at 9th Swedish Workshop on Competition & Public Procurement Research, Stockholm, Sweden.

Research output: Contribution to conferencePaperResearchpeer-review

TY - CONF

T1 - Restructuring the Electricity Industry

T2 - Vertical Structure and the Risk of Rent Extraction

AU - Boom,Anette

AU - Buehler,Stefan

N1 - CBS Library does not have access to the material

PY - 2017

Y1 - 2017

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.

M3 - Paper

ER -

Boom A, Buehler S. Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction. 2017. Paper presented at 9th Swedish Workshop on Competition & Public Procurement Research, Stockholm, Sweden.