Selecting Effective Divestments in Electricity Generation Markets

20 Pages Posted: 21 Apr 2010

See all articles by Giulio Federico

Giulio Federico

Chief Economist Team, DG Competition, European Commission

Angel Luis Lopez

Autonomous University of Barcelona; IESE Business School

Date Written: February 1, 2010

Abstract

We study the impact of electricity divestments in a stylised model where a dominant producer faces a competitive fringe with the same cost structure and is forced to sell some of its capacity. For a given demand level, the divestment which achieves the greatest reduction in prices can be several times more effective in reducing prices than a divestment of base load (or low-cost) plants. We extend this theoretical result to the case with variable electricity demand by considering a numerical example based on data from the Italian market.

Keywords: Divestments, market power, electricity, antitrust remedies

Suggested Citation

Federico, Giulio and Lopez, Angel Luis, Selecting Effective Divestments in Electricity Generation Markets (February 1, 2010). IESE Business School Working Paper No. 845, Available at SSRN: https://ssrn.com/abstract=1593594 or http://dx.doi.org/10.2139/ssrn.1593594

Giulio Federico (Contact Author)

Chief Economist Team, DG Competition, European Commission ( email )

Angel Luis Lopez

Autonomous University of Barcelona ( email )

Plaça Cívica
Cerdañola del Valles
Barcelona, Barcelona 08193
Spain
34935811528 (Fax)

HOME PAGE: http://angelluislopez.net

IESE Business School

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Barcelona, 08034
Spain
+ 34 932534200 (ext. 4554) (Phone)

HOME PAGE: http://www.angelluislopez.net

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