A Comment on "Market Power and Price Exposure: Learning from Changes in Renewable Energy Regulation"

Calvin Bryan, Pierce Donovan, Kanishka Kacker and Linh Pham

No 258, I4R Discussion Paper Series from The Institute for Replication (I4R)

Abstract: Fabra and Imelda (2023) study how the method of payment for renewable energy can reduce the ability of energy producers to exert market power in electricity markets. Their theoretical model provides predictions for dominant and fringe firm behavior under incentives using fixed prices or market exposure. Across several reported specifications, they measure the price depressing effects under both economic instruments. The authors find that in the case of the Spanish electricity market, fixed prices for renewables mitigate market power more than exposure to market pricing. We successfully computationally reproduce 100% of the main claims of the paper. We then explore the robustness of these findings to a placebo event test and modeling choices concerning seasonality and sample selection. These robustness checks typically replicate the main findings of the original paper in sign, but consistently reduce the magnitude and statistical significance of measured results.

Keywords: market power; forward contracts; arbitrage; renewables (search for similar items in EconPapers)
JEL-codes: L13 L94 L98 Q42 Q48 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-com, nep-eur and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:i4rdps:258

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