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

Anette Boom, Stefan Buehler

Research output: Contribution to conferencePaperResearchpeer-review


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.
Original languageEnglish
Publication date2017
Number of pages37
Publication statusPublished - 2017
Event9th Swedish Workshop on Competition & Public Procurement Research - Swedish Competition Authority, Stockholm, Sweden
Duration: 2 Nov 20172 Nov 2017
Conference number: 9


Workshop9th Swedish Workshop on Competition & Public Procurement Research
LocationSwedish Competition Authority
Internet address

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