| Description |
1 online resource (29 pages) |
| Series |
Discussion paper series, 0265-8003 ; no. 13088 Industrial organization |
|
Discussion paper (Centre for Economic Policy Research (Great Britain)) ; no. 13088.
|
| Summary |
I build a simple model to capture the key drivers of investment and pricing incentives in electricity markets. The focus is put on the interaction between market power and investment incentives, and the trade-off it introduces when designing the optimal regulatory instruments. In contrast to the energy-only market paradigm that assumes perfect competition, my model demonstrates that in the presence of market power scarcity prices do not promote efficient investments, even among risk-neutral investors. Combining price caps and capacity payments allows to disentangle the two-fold objective of inducing the right investment incentives while mitigating market power. Bundling capacity payments with financial obligations further mitigate market power as long as strike prices are set sufficiently close to marginal costs |
| Notes |
"Published 30 July 2018." |
|
"Submitted 30 July 2018." |
| Bibliography |
Includes bibliographical references (pages 22-23) |
| Notes |
Online resource; title from http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13088 viewed July 31, 2018 |
| Subject |
Electric utilities -- Economic aspects -- Econometric models
|
|
Electric utilities -- Rates -- Econometric models
|
| Form |
Electronic book
|
| Author |
Centre for Economic Policy Research (Great Britain), publisher.
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