Market Power and Technological Bias: The Case of Electricity Generation
AbstractIt is difficult to elminated all market power in electricity markets and it is therefore frequently suggested that some market power should be tolerated: extra revenues contribute to fixed cost recovery, facilitate investment and increase security of supply. This suggestion implicitly assumes all generation technologies benefit equally from market power. We assess a mixture of conventional and intermittent generation, eg coal plants and wind power. If all output is sold in the spot market, then intermittent generation benefits less from market power than conventional generation. Forward contracts or option contracts reduce the level of market power but bias against intermittent generators persists.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0532.
Date of creation: Aug 2005
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Web page: http://www.econ.cam.ac.uk/index.htm
market power; technology choice; electricity markets; intermittent output; forward and option contracting;
Find related papers by JEL classification:
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- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-11 (All new papers)
- NEP-COM-2005-09-11 (Industrial Competition)
- NEP-ENE-2005-09-11 (Energy Economics)
- NEP-INO-2005-09-11 (Innovation)
- NEP-MIC-2005-09-11 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Markus Burger & Bernhard Klar & Alfred Muller & Gero Schindlmayr, 2004. "A spot market model for pricing derivatives in electricity markets," Quantitative Finance, Taylor & Francis Journals, vol. 4(1), pages 109-122.
- Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-24, March.
- Richard Green & Nicholas Vasilakos, 2008.
"Market Behaviour with Large Amounts of Intermittent Generation,"
08-08, Department of Economics, University of Birmingham.
- Green, Richard & Vasilakos, Nicholas, 2010. "Market behaviour with large amounts of intermittent generation," Energy Policy, Elsevier, vol. 38(7), pages 3211-3220, July.
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