Regulation and electricity market integration: When trade introduces inefficiencies
AbstractElectricity markets vary greatly across jurisdictions, in terms of regulatory institutions, cost levels and environmental impacts. Integrating such different markets can lead to significant changes. This paper considers two jurisdictions, one with a regulated monopoly selling at average cost and one with a competitive market, and compares three different institutional regimes: autarky, a mixed-market structure with trade and a fully integrated market, where electricity is sold everywhere at marginal cost. We show that, in the second regime, the regulated monopoly always exports toward the jurisdiction pricing at marginal cost, up to inducing productive inefficiencies. By contrast, a shift from the second to the third regime, i.e. “integrated deregulation” yields a decrease in overall consumption. We identify the exact conditions under which the shift from one regime to the other results in environmental gains.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 34 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/eneco
Market integration; Regulation; Electricity trade; Environmental impacts;
Other versions of this item:
- Billette de Villemeur, Etienne & Pineau, Pierre-Olivier, 2012. "Regulation and electricity market integration: When trade introduces inefficiencies," MPRA Paper 41251, University Library of Munich, Germany.
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F15 - International Economics - - Trade - - - Economic Integration
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
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