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Selecting effective divestments in electricity generation markets

Author

Listed:
  • Federico, Giulio

    (IESE Business School)

  • Lopez, Angel

    (IESE Business School)

Abstract

We study the impact of electricity divestments in a stylised model where a dominant producer faces a competitive fringe with the same cost structure and is forced to sell some of its capacity. For a given demand level, the divestment which achieves the greatest reduction in prices can be several times more effective in reducing prices than a divestment of base load (or low-cost) plants. We extend this theoretical result to the case with variable electricity demand by considering a numerical example based on data from the Italian market.

Suggested Citation

  • Federico, Giulio & Lopez, Angel, 2010. "Selecting effective divestments in electricity generation markets," IESE Research Papers D/845, IESE Business School.
    • Handle: RePEc:ebg:iesewp:d-0845
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    File URL: http://www.iese.edu/research/pdfs/DI-0845-E.pdf
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    Keywords

    Divestments; market power; electricity; antitrust remedies;
    All these keywords.

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