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Economies of vertical integration in the Swiss electricity sector

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  • Fetz, Aurelio
  • Filippini, Massimo

Abstract

Over the last two decades, several European nations have introduced reforms to their electricity sector. Generally, these reforms require a legal and functional unbundling of vertically integrated companies. These unbundling processes may reduce the possibilities that exist to fruitfully exploit the advantages of vertical integration. The goal of this paper is to empirically analyze the presence of economies of scale and vertical integration in the Swiss electricity sector. Economies of vertical integration between electricity production and distribution result from reduced transaction costs, better coordination of highly specific and interdependent investments and less financial risk. Different econometric specifications for panel data, including a random effects and a random-coefficients model, have been used to estimate a quadratic multi-stage cost function for a sample of electricity companies. The empirical results reflect the presence of considerable economies of vertical integration and economies of scale for most of the companies considered in the analysis. Moreover, the results suggest a variation in economies of vertical integration across companies due to unobserved heterogeneity.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 32 (2010)
Issue (Month): 6 (November)
Pages: 1325-1330

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Handle: RePEc:eee:eneeco:v:32:y:2010:i:6:p:1325-1330

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Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Economies of vertical integration Electric utilities Panel data models Unbundling Unobserved heterogeneity;

References

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Citations

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Cited by:
  1. Filippini, Massimo & Wetzel, Heike, 2013. "The Impact of Ownership Unbundling on Cost Efficiency: Empirical Evidence from the New Zealand Electricity Distribution Sector," EWI Working Papers 2013-6, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  2. Goto, Mika & Inoue, Tomohiro & Sueyoshi, Toshiyuki, 2013. "Structural reform of Japanese electric power industry: Separation between generation and transmission & distribution," Energy Policy, Elsevier, vol. 56(C), pages 186-200.
  3. Daisy Shen & Qing Yang, . "Electricity Market Regulatory Reform and Competition – Case Study of the New Zealand Electricity Market," Chapters, Economic Research Institute for ASEAN and East Asia (ERIA).

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