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Application of a structural model to a wholesale electricity market: The Spanish market from January 1999 to June 2007

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Author Info

  • Vítor Marques

    (Entidade Reguladora dos Serviços Energéticos)

  • Adelino Fortunato

    ()
    (University of Coimbra)

  • Isabel Soares

    ()
    (University of Oporto)

Registered author(s):

    Abstract

    The aim of this work is to analyse the agents’ behaviour in highly concentrated and strongly regulated electricity wholesale markets with rigid demand. In order to accomplish this aim, the analysis was based on the former Spanish electricity generation market, between January 1999 and June 2007, before the MIBEL (Iberian Electricity Market) has started. The analysis is carried out in the theoretical framework of the structural models. The result of the structural model supports the apparently competitive nature of the market analysed for the period 1999 to 2003, despite than fact that the Lerner index average was high during this period. It will therefore be important in future work to analyse whether the high average mark-up verified accords with the CTCs (stranded costs compensation which have the characteristics of contracts for difference) which frame the activities of the electricity producers.

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    File URL: http://gemf.fe.uc.pt/workingpapers/pdf/2011/gemf_2011-02.pdf
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    Bibliographic Info

    Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2011-02.

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    Length: 58 pages
    Date of creation: Dec 2010
    Date of revision:
    Handle: RePEc:gmf:wpaper:2011-02

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    Keywords: electricity market; rigid demand; structural model; market power;

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    References

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    1. Michael Maloney, 2001. "Economies and Diseconomies: Estimating Electricity Cost Functions," Review of Industrial Organization, Springer, vol. 19(2), pages 165-180, September.
    2. Fabra, Natalia & Toro, Juan, 2005. "Price wars and collusion in the Spanish electricity market," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 155-181, April.
    3. Corts, Kenneth S., 1998. "Conduct parameters and the measurement of market power," Journal of Econometrics, Elsevier, vol. 88(2), pages 227-250, November.
    4. David Newbery, 2009. "Predicting Market Power in Wholesale Electricity Markets," RSCAS Working Papers 2009/03, European University Institute.
    5. Fridolfsson, Sven-Olof & Tangerås, Thomas P., 2009. "Market power in the Nordic electricity wholesale market: A survey of the empirical evidence," Energy Policy, Elsevier, vol. 37(9), pages 3681-3692, September.
    6. Griffin, James M & Gregory, Paul R, 1976. "An Intercountry Translog Model of Energy Substitution Responses," American Economic Review, American Economic Association, vol. 66(5), pages 845-57, December.
    7. Robert H. Patrick & Frank A. Wolak, 2001. "Estimating the Customer-Level Demand for Electricity Under Real-Time Market Prices," NBER Working Papers 8213, National Bureau of Economic Research, Inc.
    8. Borenstein, Severin & Bushnell, James & Knittel, Chris, 1999. "Market Power in Electricity Markets: Beyond Concentration Measures," Staff General Research Papers 31548, Iowa State University, Department of Economics.
    9. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
    10. Lau, Lawrence J., 1982. "On identifying the degree of competitiveness from industry price and output data," Economics Letters, Elsevier, vol. 10(1-2), pages 93-99.
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