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Supply Function Competition in the Spanish Wholesale Electricity Market

Author

Listed:
  • Aitor Ciarreta
  • Maria Paz Espinosa

Abstract

We represent the Spanish wholesale market as a supply function com­petition model. Theoretically, the larger generators’ supply curves for each plant should be to the left of the supply curves of plants owned by smaller generators. We test this prediction for fuel plants using data from the Spanish Market Op­erator (OMEL) from January 2002 to December 2005. Our empirical results are consistent with the model predictions and suggest that the supply function model better fits data than a discrete-bid auction model since large generators behave as price-makers irrespective whether they are the marginal firms at the auction.

Suggested Citation

  • Aitor Ciarreta & Maria Paz Espinosa, 2010. "Supply Function Competition in the Spanish Wholesale Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 137-158.
  • Handle: RePEc:aen:journl:2010v31-04-a06
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    Citations

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    Cited by:

    1. Kamiński, Jacek, 2012. "The development of market power in the Polish power generation sector: A 10-year perspective," Energy Policy, Elsevier, vol. 42(C), pages 136-147.
    2. Kamiński, Jacek, 2014. "A blocked takeover in the Polish power sector: A model-based analysis," Energy Policy, Elsevier, vol. 66(C), pages 42-52.
    3. Ciarreta, Aitor & Nasirov, Shahriyar & Silva, Carlos, 2016. "The development of market power in the Spanish power generation sector: Perspectives after market liberalization," Energy Policy, Elsevier, vol. 96(C), pages 700-710.
    4. Ciarreta, Aitor & Espinosa, María Paz, 2012. "The impact of regulation on pricing behavior in the Spanish electricity market (2002–2005)," Energy Economics, Elsevier, vol. 34(6), pages 2039-2045.
    5. Kamiński, Jacek, 2011. "Market power in a coal-based power generation sector: The case of Poland," Energy, Elsevier, vol. 36(11), pages 6634-6644.
    6. Carolina Manzano & Xavier Vives, 2016. "Market Power and Welfare in Asymmetric Divisible Good Auctions," CESifo Working Paper Series 6261, CESifo Group Munich.
    7. Espinosa Alejos, María Paz, 2013. "Understanding Tariff Deficit and its Challenges," DFAEII Working Papers DFAEII;2013-01, University of the Basque Country - Department of Foundations of Economic Analysis II.
    8. Moutinho, Victor & Moreira, António C. & Mota, Jorge, 2014. "Do regulatory mechanisms promote competition and mitigate market power? Evidence from Spanish electricity market," Energy Policy, Elsevier, vol. 68(C), pages 403-412.
    9. Paulo Cesar Coutinho & Andre Rossi de Oliveira, 2013. "Trading Forward in the Brazilian Electricity Market," International Journal of Energy Economics and Policy, Econjournals, vol. 3(3), pages 272-287.
    10. repec:gam:jsusta:v:9:y:2017:i:8:p:1318-:d:106509 is not listed on IDEAS
    11. Mulder, Machiel & Petrikaitė, Vaiva & Scholtens, Bert, 2015. "Distributed energy generation techniques and the competitive fringe effect in electricity markets," Resource and Energy Economics, Elsevier, vol. 42(C), pages 125-140.
    12. Ciarreta, Aitor & Espinosa, Maria Paz & Pizarro-Irizar, Cristina, 2017. "Has renewable energy induced competitive behavior in the Spanish electricity market?," Energy Policy, Elsevier, vol. 104(C), pages 171-182.

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    JEL classification:

    • F0 - International Economics - - General

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