What is the strategic value of investments in alternative local energy supply?
AbstractThis paper studies strategic incentives to invest in electricity generation capacity using a local fuel like renewables or coal. It shows that investing in this capacity, even if not used, improves the bargaining position of a power producing firm that also imports another fuel such as gas. When several importers are considered, the paper finds that investment has a positive strategic effect on all other importers’ bargaining position. A government energy policy that forces utilities to invest in capacity based on particular fuels can be justified not only for environmental but also for strategic reasons.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces10.04.
Date of creation: Feb 2010
Date of revision:
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-23 (All new papers)
- NEP-ENE-2010-12-23 (Energy Economics)
- NEP-ENV-2010-12-23 (Environmental Economics)
- NEP-GTH-2010-12-23 (Game Theory)
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