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An Analysis of the Investment Decisions on the European Electricity Markets, over the 1945-2013 Period


  • Pascal da Costa

    () (épocc - LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec)

  • Bianka Shoai Tehrani

    (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec, ITESE - Institut de Technico-Economie des Systèmes Energétiques - Université Paris-Saclay - CEA - Commissariat à l'énergie atomique et aux énergies alternatives)


The aim of the article is to understand how the drivers for investment decisions in the capacities of electricity production have evolved over time, from 1945 to the present day, in the specific context of Europe facing wars and conflicts, scientific and technological progress, strong political and academic developments. We study the electric investment decisions by comparing the history of the European electricity markets with the successively dominant economic theories in this field. Therefore, we highlight differences between rational behaviors, such as described by the theories, and actual behaviors of investors and governments. Thus the liberalization of electricity markets in the European Union, more than twenty-five years ago, parts of a rationalization prescribed by new economic theories. It is clear that liberalization is being discussed. First, it remains very heterogeneous, which complicates the goal of creating a large single market for electricity in the Union. Second, we see a recent re-centralization of energy policy in the European Union (EU), which takes the form of a new regulation mainly relating to climate and renewables. However, this re-regulation is different from centralized control experienced by all European electricity markets until the mid-1980s.

Suggested Citation

  • Pascal da Costa & Bianka Shoai Tehrani, 2013. "An Analysis of the Investment Decisions on the European Electricity Markets, over the 1945-2013 Period," Working Papers hal-00995799, HAL.
  • Handle: RePEc:hal:wpaper:hal-00995799
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    References listed on IDEAS

    1. Anne Perrot, 2002. "Les frontières entre régulation sectorielle et politique de la concurrence," Revue Française d'Économie, Programme National Persée, vol. 16(4), pages 81-112.
    2. Sharkey,William W., 1983. "The Theory of Natural Monopoly," Cambridge Books, Cambridge University Press, number 9780521271943.
    3. Severin Borenstein & James Bushnell & Christopher R. Knittel, 1999. "Market Power in Electricity Markets: Beyond Concentration Measures," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 65-88.
    4. Baumol, William J, 1977. "On the Proper Cost Tests for Natural Monopoly in a Multiproduct Industry," American Economic Review, American Economic Association, vol. 67(5), pages 809-822, December.
    5. Newbery, David M., 1997. "Privatisation and liberalisation of network utilities," European Economic Review, Elsevier, vol. 41(3-5), pages 357-383, April.
    6. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743.
    7. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-661, September.
    8. George Eads, 1971. "A.E. Kahn: The Economics of Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(2), pages 678-682, Autumn.
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    Cited by:

    1. Wenhui Tian & Pascal da Costa & Jean-Claude Bocquet, 2015. "Inequalities of Sectors CO 2 emissions in China, USA and France, 2010-2050," Working Papers hal-01219769, HAL.

    More about this item


    Renewables; European Electricity Market; Electricity Investments; European Energy Market Liberalisation; Climatic issues; Renewables.;

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