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Screening instruments for monitoring market power in wholesale electricity markets: Lessons from applications in Germany

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  • Bataille, Marc
  • Steinmetz, Alexander
  • Thorwarth, Susanne

Abstract

While liberalization in energy markets has been a widely successful process all over the world, incumbents often still hold a dominant position. Thus, electricity wholesale markets are subject to market surveillance. Nevertheless, consolidated findings on abusive practices of market power and their cause and effect in wholesale electricity markets are scarce and non-controversial market monitoring practices fail to exist. Our application of the established measure of market concentration RSI shows that it serves as a decent indicator for the rents that can be gained in the market but also reveals considerable weaknesses of the RSI. Therefore, we propose and apply the "Return on Withholding Capacity Index" (RWC) representing a measure of the firms' incentive of withholding capacity as a complementary index to the RSI.

Suggested Citation

  • Bataille, Marc & Steinmetz, Alexander & Thorwarth, Susanne, 2014. "Screening instruments for monitoring market power in wholesale electricity markets: Lessons from applications in Germany," ZEW Discussion Papers 14-048, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:14048
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    More about this item

    Keywords

    Market Power; Electric Power Markets; Measurement;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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