Investment Coordination in Network Industries: The Case of Electricity Grid and Electricity
Liberalization of network industries frequently separates the network from the other parts of the industry. This is important in particular for the electricity industry where private firms invest into generation facilities, while net- work investments usually are controlled by regulators. We discuss two regulatory regimes. First, the regulator can only decide on the network extension. Second, she can additionally use a "capacity market" with payments contingent on private generation investment. For the first case, we find that even absent asymmetric information, a lack of regulatory commitment can cause inefficiently high or inefficiently low investments. For the second case, we develop a standard handicap auction which implements the first best under asymmetric information, if there are no shadow costs of public funds. With shadow costs, no simple mechanism can implement the second best outcome.
|Date of creation:||24 Jun 2013|
|Contact details of provider:|| Postal: Vogelsanger Str. 321, Alte Wagenfabrik, 50827 Köln|
Phone: ++ 49 (0) 221 277 29 100
Fax: ++ 49 (0) 221 277 29 400
Web page: http://www.ewi.uni-koeln.de/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Vincent Rious & Jean-Michel Glachant & Philippe Dessante, 2010. "Transmission Network Investment as an Anticipation Problem," RSCAS Working Papers 2010/04, European University Institute.
- Thomas-Olivier Léautier & Véronique Thelen, 2009. "Optimal expansion of the power transmission grid: why not?," Journal of Regulatory Economics, Springer, vol. 36(2), pages 127-153, October.
- Felix Höffler & Sebastian Kranz, 2011.
"Using Forward Contracts to Reduce Regulatory Capture,"
Working Paper Series of the Max Planck Institute for Research on Collective Goods
2011_09, Max Planck Institute for Research on Collective Goods.
- Felix Höffler & Sebastian Kranz, 2015. "Using Forward Contracts to Reduce Regulatory Capture," Journal of Industrial Economics, Wiley Blackwell, vol. 63(4), pages 598-624, December.
- Höffler, Felix & Kranz, Sebastian, 2010. "Using Forward Contracts to Reduce Regulatory Capture," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 320, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Rious Vincent & Perez Yannick & Glachant Jean-Michel, 2011. "Power Transmission Network Investment as an Anticipation Problem," Review of Network Economics, De Gruyter, vol. 10(4), pages 1-23, December.
- Peter Cramton & Steven Stoft, 2005.
"A Capacity Market that Makes Sense,"
Papers of Peter Cramton
05licap, University of Maryland, Department of Economics - Peter Cramton, revised 2005.
- Paul L. Joskow, 1997. "Restructuring, Competition and Regulatory Reform in the U.S. Electricity Sector," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 119-138, Summer.
- Scott E. Masten, 2011. "Public Utility Ownership in 19th-Century America: The "Aberrant" Case of Water," Journal of Law, Economics and Organization, Oxford University Press, vol. 27(3), pages 604-654.
- Chao, Hung-Po & Peck, Stephen, 1996. "A Market Mechanism for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 10(1), pages 25-59, July.
- Thomas-Olivier Leautier, 2000. "Regulation of an Electric Power Transmission Company," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 61-92.
When requesting a correction, please mention this item's handle: RePEc:ris:ewikln:2013_012. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Williams)
If references are entirely missing, you can add them using this form.