Capacity choices in liberalised electricity markets
AbstractThis paper addresses the issue of investment in electricity generation in the context of a liberalised market. We use the main results derived from a theoretical model where firms invest strategically to simulate the Spanish electricity system with real-world data. Our results indicate that, under reasonable parameter constellations regarding the number of agents, the level of capacity resulting from private decisions falls well short of the social optimum. Last, we show that two regulatory mechanisms that have been used to generate additional incentives for private agents to install capacity (capacity payment and price-adder) are ineffective and/or prohibitively costly.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Policy.
Volume (Year): 37 (2009)
Issue (Month): 7 (July)
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Web page: http://www.elsevier.com/locate/enpol
Electricity Capacity Long-run investment;
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- Castro-Rodriguez, Fidel & Marín Uribe, Pedro Luis & Siotis, Georges, 2001. "Capacity Choices in Liberalized Electricity Markets," CEPR Discussion Papers 2998, C.E.P.R. Discussion Papers.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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