Restructuring Electricity When Demand is Uncertain : The Effects on Capacity Investments, Retail Prices and Welfare
Type
working paper
Date Issued
2010
Author(s)
Abstract
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.
Language
English
Keywords
Electricity
Investments
Generating Capacities
Vertical Integration
Monopoly and Competition
HSG Classification
contribution to scientific community
Refereed
No
Publisher
Copenhagen Business School Working Paper No. 11-2006 (revised version)
Subject(s)
Eprints ID
71135