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Fossil Fuels and Renewable Energy: Mix or Match?

Author

Listed:
  • Natalia Fabra
  • Gerard Llobet

Abstract

This article investigates the influence of technological ownership on pricing strategies and productive efficiency. Our motivation comes from the evolving landscape of electricity markets where firms are transitioning from diversified to specialized portfolios, focusing on renewable energy or fossil fuels. Our theoretical model demonstrates that diversified firms compete more vigorously than their specialized counterparts. Conversely, specialized firms exhibit higher productive efficiency but only when thermal sources dominate. The magnitude of our theoretical predictions is assessed through simulations using data from the Spanish electricity market. Methodologically, our analysis offers novel insights for studying multi‐unit auctions with cost heterogeneity and privately known capacities.

Suggested Citation

  • Natalia Fabra & Gerard Llobet, 2026. "Fossil Fuels and Renewable Energy: Mix or Match?," RAND Journal of Economics, RAND Corporation, vol. 57(1), pages 140-157, March.
    • Handle: RePEc:bla:randje:v:57:y:2026:i:1:p:140-157
    DOI: 10.1111/1756-2171.70044
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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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