What is the strategic value of investments in alternative local energy supply?
This paper studies strategic incentives to invest in electricity generation capacity using a local fuel like renewables or coal. It shows that investing in this capacity, even if not used, improves the bargaining position of a power producing firm that also imports another fuel such as gas. When several importers are considered, the paper finds that investment has a positive strategic effect on all other importers’ bargaining position. A government energy policy that forces utilities to invest in capacity based on particular fuels can be justified not only for environmental but also for strategic reasons.
|Date of creation:||Feb 2010|
|Date of revision:|
|Contact details of provider:|| Web page: http://feb.kuleuven.be/Economics/|
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