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Vertical integration and market power: A model-based analysis of restructuring in the Korean electricity market

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Listed:
  • Bunn, Derek W.
  • Martoccia, Maria
  • Ochoa, Patricia
  • Kim, Haein
  • Ahn, Nam-Sung
  • Yoon, Yong-Beom

Abstract

An agent-based simulation model is developed using computational learning to investigate the impact of vertical integration between electricity generators and retailers on market power in a competitive wholesale market setting. It is observed that if partial vertical integration creates some market foreclosure, whether this leads to an increase or decrease in market power is situation specific. A detailed application to the Korean market structure reveals this to be the case. We find that in various cases, whilst vertical integration generally reduces spot prices, it can increase or decrease the market power of other market generators, depending upon the market share and the technology segment of the market, which is integrated, as well as the market concentrations before and after the integration.

Suggested Citation

  • Bunn, Derek W. & Martoccia, Maria & Ochoa, Patricia & Kim, Haein & Ahn, Nam-Sung & Yoon, Yong-Beom, 2010. "Vertical integration and market power: A model-based analysis of restructuring in the Korean electricity market," Energy Policy, Elsevier, vol. 38(7), pages 3710-3716, July.
  • Handle: RePEc:eee:enepol:v:38:y:2010:i:7:p:3710-3716
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Khan, Muhammad T. & Thopil, George Alex & Lalk, Jorg, 2016. "Review of proposals for practical power sector restructuring and reforms in a dynamic electricity supply industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 326-335.
    2. Romagnoli, Francesco & Barisa, Aiga & Dzene, Ilze & Blumberga, Andra & Blumberga, Dagnija, 2014. "Implementation of different policy strategies promoting the use of wood fuel in the Latvian district heating system: Impact evaluation through a system dynamic model," Energy, Elsevier, vol. 76(C), pages 210-222.
    3. Li, Gong & Shi, Jing & Qu, Xiuli, 2011. "Modeling methods for GenCo bidding strategy optimization in the liberalized electricity spot market–A state-of-the-art review," Energy, Elsevier, vol. 36(8), pages 4686-4700.
    4. Bunn, Derek & Yusupov, Tim, 2015. "The progressive inefficiency of replacing renewable obligation certificates with contracts-for-differences in the UK electricity market," Energy Policy, Elsevier, vol. 82(C), pages 298-309.
    5. Abada, Ibrahim & Briat, Vincent & Massol, Olivier, 2013. "Construction of a fuel demand function portraying interfuel substitution, a system dynamics approach," Energy, Elsevier, vol. 49(C), pages 240-251.

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