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Why Did British Electricity Prices Fall after 1998?

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  • Joanne Evans and Richard Green

Abstract

In an attempt to reduce high electricity prices in England and Wales, the government and regulator forced the largest generators to divest some plant in the late 1990s, and introduced New Electricity Trading Arrangements in March 2001. We use a supply function model to simulate prices from April 1997 to March 2004, and find no change in the relationship between our simulations and actual prices over this period. This implies that while the reduction in concentration has had a significant impact on short-term wholesale electricity prices, the switch from a centralised to a decentralised market has not.

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File URL: ftp://ftp.bham.ac.uk/pub/RePEc/pdf/2005netaprices.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 05-13.

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Length: 24 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:bir:birmec:05-13

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Postal: Edgbaston, Birmingham, B15 2TT
Web page: http://www.economics.bham.ac.uk
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Keywords: Electricity; market power; concentration; market rules;

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Cited by:
  1. Bert WILLEMS & Ina RUMIANTSEVA & Hannes WEIGT, 2007. "Cournot versus supply functions: what does the data tell us?," Center for Economic Studies - Discussion papers ces0720, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  2. Holmberg, Pär & Lazarczyk, Ewa, 2012. "Congestion Management in Electricity Networks: Nodal, Zonal and Discriminatory Pricing," Working Paper Series 915, Research Institute of Industrial Economics.
  3. Giulietti, Monica & Grossi, Luigi & Waterson, Michael, 2010. "Price transmission in the UK electricity market: Was NETA beneficial?," Energy Economics, Elsevier, vol. 32(5), pages 1165-1174, September.
  4. Niamh McCarthy, 2005. "Market Size, Market Structure & Market Power in the Irish Electricity Industry," Papers WP168, Economic and Social Research Institute (ESRI).
  5. Hesamzadeh, Mohammad R. & Biggar, Darryl R. & Hosseinzadeh, Nasser, 2011. "The TC-PSI indicator for forecasting the potential for market power in wholesale electricity markets," Energy Policy, Elsevier, vol. 39(10), pages 5988-5998, October.
  6. Green, Richard, 2001. "Failing Electricity Markets: Should we Shoot the Pools?," CEPR Discussion Papers 3010, C.E.P.R. Discussion Papers.
  7. Holmberg, Pär & Newbery, David, 2010. "The supply function equilibrium and its policy implications for wholesale electricity auctions," Utilities Policy, Elsevier, vol. 18(4), pages 209-226, December.
  8. Twomey, P. & Green, R. & Neuhoff, K. & Newbery, D., 2005. "A Review of the Monitoring of Market Power The Possible Roles of TSOs in Monitoring for Market Power Issues in Congested Transmission Systems," Cambridge Working Papers in Economics 0504, Faculty of Economics, University of Cambridge.
  9. Isabel Soares & Andres Faina & Jose Lopez & Laura Varela-Candamio, 2012. "What’s Happening to the European Electricity Market?," European Research Studies Journal, European Research Studies Journal, vol. 0(Special I), pages 145-156.
  10. Green, Richard & Vasilakos, Nicholas, 2010. "Market behaviour with large amounts of intermittent generation," Energy Policy, Elsevier, vol. 38(7), pages 3211-3220, July.
  11. Kalantzis, Fotis & Sakellaris, Kostis, 2012. "Investigating the Impact of the Greek Electricity Market Reforms on its Day-Ahead Market Prices," MPRA Paper 37794, University Library of Munich, Germany.
  12. Heim, Sven & Götz, Georg, 2013. "Do pay-as-bid auctions favor collusion? Evidence from Germany's market for reserve power," ZEW Discussion Papers 13-035, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Malaguzzi Valeri, Laura, 2006. "Comparison of Electricity Deregulation around the World and Implications for Ireland," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2006(3-Autumn), pages 38-63.
  14. Karakatsani, Nektaria V. & Bunn, Derek W., 2008. "Forecasting electricity prices: The impact of fundamentals and time-varying coefficients," International Journal of Forecasting, Elsevier, vol. 24(4), pages 764-785.

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