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Strategic capacity withholding through failures in the German-Austrian electricity market

Listed author(s):
  • Bergler, Julian
  • Heim, Sven
  • Hüschelrath, Kai

In electricity day-ahead markets organized as uniform price auction, a small reduction in supply in times of high demand can cause substantial increases in price. We use a unique data set of failures of generation capacity in the German-Austrian electricity market to investigate the relationship between electricity spot prices and generation failures. Differentiating between strategic and non-strategic failures, we find a positive impact of prices on non-usable marginal generation capacity for strategic failures only. Our empirical analysis therefore provides evidence for the existence of strategic capacity withholding through failures suggesting further monitoring efforts by public authorities to effectively reduce the likelihood of such abuses of a dominant position.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 16-009.

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Date of creation: 2016
Handle: RePEc:zbw:zewdip:16009
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