Restructuring Electricity Markets when Demand is Uncertain: Effects on Capacity Investments, Prices and Welfare

Arbeitspapier

We examine the effects of reorganizing electricity markets on ca- pacity investments, retail prices and welfare when demand is uncer- tain. We study the following market configurations: (i) integrated monopoly, (ii) integrated duopoly with wholesale trade, and (iii) sep- arated duopoly with wholesale trade. Assuming that wholesale prices can react to changes in retail prices (but not vice versa), we find that generators install sufficient capacity to serve retail demand in each market configuration, thus avoiding black-outs. Furthermore, aggre- gate capacity levels and retail prices are such that the separated (inte- grated) duopoly with wholesale trade performs best (worst) in terms of welfare.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working paper ; No. 11-2006

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Monopoly ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Auctions ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Monopoly; Monopolization Strategies ; Oligopoly and Other Imperfect Markets
• Subject: Electricity ; Investments ; Generating Capacities ; Vertical Integration ; Monopoly and Competition

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Buehler, Stefan ; Boom, Anette
• Event: Veröffentlichung
• (who): Copenhagen Business School (CBS), Department of Economics
• (where): Frederiksberg
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/208528
• Last update: 10.03.2025, 11:44 AM CET