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Strategic investment in electricity generation with renewable entrants: The case of French nuclear power

Author

Listed:
  • Abdel Mokhtari

    (EM - EMLyon Business School)

  • Richard Ruble

    (EM - EMLyon Business School, GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique)

Abstract

We study incentives to invest in electricity generation capacity if an incumbent using nuclear power competes with an endogenous number of entrants using intermittent renewable energy sources. The intermittence of renewables makes the incumbent less aggressive, and the incumbent accommodates if the efficiency difference between technologies is not too large. We analyze France's long-running subsidy scheme, the ARENH, through the prism of our model. This policy achieves its aim of making product market outcomes more competitive through an endogenous entry channel, but if investments in nuclear power are restarted then pursuing such a scheme would run the risk of facilitating deterrence.

Suggested Citation

  • Abdel Mokhtari & Richard Ruble, 2024. "Strategic investment in electricity generation with renewable entrants: The case of French nuclear power," Working Papers hal-04836469, HAL.
    • Handle: RePEc:hal:wpaper:hal-04836469
    Note: View the original document on HAL open archive server: https://hal.science/hal-04836469v1
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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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