Investment coordination in network industries: The case of electricity grid and electricity generation

Arbeitspapier

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 …rms invest into generation facilities, while network 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: EWI Working Paper ; No. 13/12

Classification and Topics

• Classification: Wirtschaft ; Auctions ; Market Design ; Regulated Industries and Administrative Law ; Economics of Regulation ; Electric Utilities
• Subject: Regulation ; commitment ; capacity markets ; transmission system investment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Höffler, Felix ; Wambach, Achim
• Event: Veröffentlichung
• (who): Institute of Energy Economics at the University of Cologne (EWI)
• (where): Köln
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/92965
• Last update: 10.03.2025, 11:45 AM CET