QUANTIFYING MARKET POWER IN THE GERMAN WHOLESALE ELECTRICITY MARKET USING A DYNAMIC MULTI‐REGIONAL DISPATCH MODEL*

Felix Müsgens

Journal of Industrial Economics, 2006, vol. 54, issue 4, 471-498

Abstract: This paper quantifies the degree of market power in the German wholesale electricity market. A dispatch model simulates competitive marginal costs. In addition to common input factors like plant capacities, fuel prices and load structures, the model also incorporates international power exchange and dynamic effects like start‐up costs and hydro storage plant dispatch. The simulated prices are subsequently used as a benchmark for observed electricity prices. The analysis reveals significant market power in the German electricity market, mainly exhibited during peak periods. Producer surplus is also increased significantly due to strategic behavior.

Date: 2006
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