Market Power and Price Exposure: Learning from Changes in Renewable Energy Regulation
American Economic Journal: Economic Policy
vol. 15,
no. 4, November 2023
(pp. 323-58)
Abstract
Given the critical role of renewable energies in current and future electricity markets, it is important to understand how they affect firms' pricing incentives. We study whether the price-depressing effect of renewables depends on their degree of market price exposure. Paying renewables with fixed prices, rather than market-based prices, is more effective at curbing market power when the dominant firms own large shares of renewables, and vice versa. Our empirical analysis leverages several short-lived changes to renewables regulation in the Spanish market and shows that switching from full-price exposure to fixed prices caused a 2–4 percent reduction in the average price-cost markup.Citation
Fabra, Natalia, and Imelda. 2023. "Market Power and Price Exposure: Learning from Changes in Renewable Energy Regulation." American Economic Journal: Economic Policy, 15 (4): 323-58. DOI: 10.1257/pol.20210221Additional Materials
JEL Classification
- L13 Oligopoly and Other Imperfect Markets
- L94 Electric Utilities
- L98 Industry Studies: Utilities and Transportation: Government Policy
- Q42 Alternative Energy Sources
- Q48 Energy: Government Policy
There are no comments for this article.
Login to Comment