Market Power and Price Exposure- Learning from Changes in Renewable Energy Regulation

Natalia Fabra and Imelda Imelda

No 31-2022, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

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.

Keywords: Market power; Forward contracts; Arbitrage; Renewables (search for similar items in EconPapers)
JEL-codes: D47 J52 L14 Q20 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2022-12-28
New Economics Papers: this item is included in nep-com, nep-ene, nep-env and nep-reg
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Related works:
Journal Article: Market Power and Price Exposure: Learning from Changes in Renewable Energy Regulation (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heidwp31-2022

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