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Decentralizing hydro power production

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Author Info

  • Stefan Ambec
  • Joseph Doucet

Abstract

We analyse the production of electricity from n power stations in a dynamic model. Each power station's production of electricity is constrained by the quantity of water available to it (supply constraint) as well as limitations on reservoir capacity (storage constraint). We show that hydro power production can lead to two sources of welfare loss: suboptimal management of water resources and the exercise of market power. A monopolist minimizes the first source of inefficiency, whereas decentralized production in a competitive environment minimizes the second. The decision to introduce competition in hydropower production must account for these two opposite effects.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 36 (2003)
Issue (Month): 3 (August)
Pages: 587-607

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Handle: RePEc:cje:issued:v:36:y:2003:i:3:p:587-607

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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Cited by:
  1. Abdessalem Abbassi & Ahlem Dakhlaoui & Lota D.Tamini, 2014. "Risk Aversion and Dynamic Games Between Hydroelectric Operators under Uncertainty," Cahiers de recherche CREATE 2014-4, CREATE.
  2. C. Robert Clark & Andrew Leach, 2005. "Energy Regulation in Quebec," CIRANO Burgundy Reports 2005rb-03, CIRANO.
  3. Talat S. Genc & Henry Thille, 2009. "Investment in Electricity Markets with Asymmetric Technologies," Working Papers 0909, University of Guelph, Department of Economics and Finance.
  4. Stefan Ambec & Claude Crampes, 2010. "Electricity Production with Intermittent Sources of Energy," LERNA Working Papers 10.07.313, LERNA, University of Toulouse.
  5. Finn R. Førsund, 2006. "The Anatomy of Market Power in Electricity Markets with Hydropower as Dominating Technology," ICER Working Papers 21-2006, ICER - International Centre for Economic Research.
  6. Crampes, Claude & Moreaux, Michel, 2008. "Pumping Water to Compete in Electricity Markets," IDEI Working Papers 507, Institut d'Économie Industrielle (IDEI), Toulouse.
  7. van Ackere, Ann & Ochoa, Patricia, 2010. "Managing a hydro-energy reservoir: A policy approach," Energy Policy, Elsevier, vol. 38(11), pages 7299-7311, November.
  8. Rangel, Luiz Fernando, 2008. "Competition policy and regulation in hydro-dominated electricity markets," Energy Policy, Elsevier, vol. 36(4), pages 1292-1302, April.
  9. Haddad, Mohamed S., 2011. "Capacity choice and water management in hydroelectricity systems," Energy Economics, Elsevier, vol. 33(2), pages 168-177, March.
  10. Claude Crampes & Michel Moreaux, 2009. "Pumped storage and energy saving," LERNA Working Papers 09.17.293, LERNA, University of Toulouse.
  11. KLAUS ABBINK & MOLLER, Lars Christian & SARAH O’HARA, 2005. "The Syr Darya River Conflict: An Experimental Case Study," Discussion Papers 2005-14, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  12. Klaus Abbink & Lars Moller & Sarah O’Hara, 2010. "Sources of Mistrust: An Experimental Case Study of a Central Asian Water Conflict," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 45(2), pages 283-318, February.
  13. Ambec, Stefan & Crampes, Claude, 2012. "Electricity provision with intermittent sources of energy," Resource and Energy Economics, Elsevier, vol. 34(3), pages 319-336.
  14. Hoel, Michael, 2004. "Electricity prices in a mixed thermal and hydropower system," Memorandum 28/2004, Oslo University, Department of Economics.
  15. C. Robert Clark & Andrew Leach, 2005. "La réglementation de l’énergie au Québec," CIRANO Burgundy Reports 2005rb-04, CIRANO.

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