IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v36y2008i11p4227-4234.html
   My bibliography  Save this article

Price formation and market power in the German wholesale electricity market in 2006

Author

Listed:
  • Weigt, Hannes
  • Hirschhausen, Christian von

Abstract

From 2002 to 2006, German wholesale electricity prices more than doubled. The purpose of this paper is to estimate the price components in 2006 in order to identify the factors responsible for the increase. We develop a competitive benchmark model, taking into account power plant characteristics, fuel and CO2-allowance prices, wind generation, cross-border flows, unit commitment, and startup conditions, to estimate the difference between generation costs and observed market prices for every hour in 2006. We find that prices at the German wholesale market (European Energy Exchange--EEX) are above competitive levels for a large fraction of the observations. We verify the robustness of the results by carrying out sensitivity analyses. We also address the issue of revenue adequacy.

Suggested Citation

  • Weigt, Hannes & Hirschhausen, Christian von, 2008. "Price formation and market power in the German wholesale electricity market in 2006," Energy Policy, Elsevier, vol. 36(11), pages 4227-4234, November.
  • Handle: RePEc:eee:enepol:v:36:y:2008:i:11:p:4227-4234
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301-4215(08)00355-8
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul L. Joskow & Edward Kohn, 2002. "A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-35.
    2. Zachmann, Georg & von Hirschhausen, Christian, 2008. "First evidence of asymmetric cost pass-through of EU emissions allowances: Examining wholesale electricity prices in Germany," Economics Letters, Elsevier, vol. 99(3), pages 465-469, June.
    3. Thure Traber & Claudia Kemfert, 2007. "Impacts of the German Support for Renewable Energy on Electricity Prices, Emissions and Profits: An Analysis Based on a European Electricity Market Model," Discussion Papers of DIW Berlin 712, DIW Berlin, German Institute for Economic Research.
    4. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    5. Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
    6. Felix Müsgens, 2006. "QUANTIFYING MARKET POWER IN THE GERMAN WHOLESALE ELECTRICITY MARKET USING A DYNAMIC MULTI-REGIONAL DISPATCH MODEL -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 471-498, December.
    7. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
    8. Georg Zachmann, 2007. "A Markov Switching Model of the Merit Order to Compare British and German Price Formation," Discussion Papers of DIW Berlin 714, DIW Berlin, German Institute for Economic Research.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Electricity Germany Market power;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:36:y:2008:i:11:p:4227-4234. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/enpol .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.