Green Certificates and Market Power on the Nordic Power Market
AbstractThe purpose of this study is to elucidate under which circumstances, how, and to what extent market power on the TGC market can be used to affect the entire electricity market. There are basically two reasons for being concerned with market power in TGC markets. One is that a small number of companies may have exclusive access to first rate sites for wind power generation. The other is that withdrawal of a small number of TGCs implies a multiple reduction of electricity consumption, with corresponding increases of end user prices. For the purpose of investigating the principles by which market power may be exercised in this setting a simple analytical model is designed and analytical results are derived. To investigate matters further a numerical model, based on the analytical model, is constructed for the Nordic countries. Among the Nordic countries only Sweden has a TGC market but there is a common Nordic electricity market with free trade of electricity. The analysis shows that Swedish companies possessing capacity for green electricity generation, indeed, have the ability to exercise market power on the common Nordic power market by withholding TGCs. However, the analysis reveals that an opening of TGC trade between the the Nordic countries to a large extent achieves the objective of eliminating the use of marketpower that would otherwise be established. Also, this may have a cushioning effect on the volatility of TGC prices.
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Bibliographic InfoPaper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 12/10.
Length: 21 pages
Date of creation: 01 Dec 2010
Date of revision:
Contact details of provider:
Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Web page: http://www.uib.no/econ/en
More information through EDIRC
Renewable energy; electricity; green certificates; market power; Nordic power market.;
Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-19 (All new papers)
- NEP-CMP-2011-03-19 (Computational Economics)
- NEP-ENE-2011-03-19 (Energy Economics)
- NEP-ENV-2011-03-19 (Environmental Economics)
- NEP-MIC-2011-03-19 (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.:
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Working Papers in Economics
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