The potential impact of cross-ownership in transmission: An application to the Belgian electricity market
AbstractThis paper looks at the potential effect of partial ownership on the generation and the transmission sector of electricity markets. Ideally, in liberalized electricity markets, transmission is separated form generation. The transmission sector is a natural monopoly operated by a regulated transmission firm, while the generation sector is open for competition. This paper assumes that the transmission firm is not very well regulated and behaves strategically, that there is oligoplistic competition in generation, and that one of the generators, the incumbent, owns part of the transmission firm. We then study the effect of this partial ownership in a numerical model which is calibrated on the Belgian market. The model captures two kinds of partial ownership interactions: passive ownership, where the generation firm simply cashes its share of the transmission firm’s profit without having a direct impact on its decision process, and active ownership, where the generator has a direct influence on the transmission firm’s decision process. It is shown that ownership of the network operator by the incumbent generator reduces double marginalization (= welfare improving) but also reduces entry in the generation market (= welfare decreasing).
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment in its series Energy, Transport and Environment Working Papers Series with number ete0501.
Length: 34 pages
Date of creation: Jan 2005
Date of revision:
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More information through EDIRC
vertical integration; unbundling; cross-ownership; electricity;
Other versions of this item:
- Guido Pepermans & Bert Willems, 2005. "The Potential Impact of Cross-Ownership in Transmission: an Application to the Belgian Electricity Market," Center for Economic Studies - Discussion papers ces0503, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-16 (All new papers)
- NEP-COM-2005-01-16 (Industrial Competition)
- NEP-ENE-2005-01-16 (Energy Economics)
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.:
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