Now showing 1 - 2 of 2
  • Publication
    Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction
    ( 2014) ;
    Boom, Anette
    We study the role of vertical structure in determining generating capacities and retail prices in the electricity industry. Allowing for uncertain demand, we compare three market configurations: (i) integrated monopoly, (ii) integrated duopoly with wholesale trade, and (iii) separated duopoly with wholesale trade. We find that equilibrium capacities and retail prices are such that welfare is highest (lowest) under separated (integrated) duopoly. The driving force behind this result is the risk of rent extraction faced by competing integrated Generators on the wholesale market. Our analysis suggests that vertical structure plays an important role in determining generating capacities and retail prices.
  • Publication
    Restructuring Electricity When Demand is Uncertain : The Effects on Capacity Investments, Retail Prices and Welfare
    (Copenhagen Business School Working Paper No. 11-2006 (revised version), 2010) ;
    Boom, Anette
    This paper proposes a stylized model of the electricity industry taking the vertical structure of the industry into account. We examine the effects of restructuring on capacity investments, retail prices and welfare, allowing for uncertain demand. We consider the following market configurations: (i) integrated monopoly, (ii) integrated duopoly with wholesale trade, and (iii) separated duopoly with wholesale trade. We find that generators install sufficient capacity to serve retail demand (thus avoiding blackouts) in all configurations. Aggregate capacity levels and retail prices are such that the separated (integrated) duopoly with wholesale trade performs best (worst) in terms of welfare.