Strategic investment in electricity generation with renewable entrants: The case of French nuclear power

Abdel Mokhtari () and Richard Ruble
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Abdel Mokhtari: emlyon business school, 144 avenue Jean Jaurès, 69007, Lyon, France

No 2422, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: We study incentives to invest in electricity generation capacity if an incumbent using nuclear power competes with an endogenous number of entrants using intermittent renewable energy sources. The intermittence of renewables makes the incumbent less aggressive, and the incumbent accommodates if the efficiency difference between technologies is not too large. We analyze France’s long-running subsidy scheme, the ARENH, through the prism of our model. This policy achieves its aim of making product market outcomes more competitive through an endogenous entry channel, but if investments in nuclear power are restarted then pursuing such a scheme would run the risk of facilitating deterrence.

Keywords: Free entry; Intermittence; Renewable energy; Stackelberg leadership (search for similar items in EconPapers)
JEL-codes: D24 D61 L13 Q41 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-com, nep-ene, nep-env, nep-ind and nep-reg
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Working Paper: Strategic investment in electricity generation with renewable entrants: The case of French nuclear power (2024)
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