Market Power Issues in Liberalized Wholesale Electricity Markets: A Review of the Literature with a Look into the Future

Thao Pham

Revue d'économie politique, 2019, vol. 129, issue 3, 325-354

Abstract: The two last centuries have witnessed an exceptional revolution in the organization of electric power sector worldwide, with the liberalization process transforming what had been a vertically-integrated monopoly subject to regulation into a market-based system. The shift to reliance on market prices raises a risk that some firms could exercise their market power. This paper examines a wide range of methods of detecting market power that have been employed by academics and regulators in the electricity sector. I show that many technical, economic, and regulatory factors render the exercise of market power particularly likely in these markets and make detecting it particularly challenging. Based on an analysis of strengths, weaknesses and popularity of each methodology, I provide several guidelines for future work on market power modeling. This has important implications for policy makers when identifying appropriate policies of market power mitigation and ensuring the functioning of the electricity system in this period of transition in Europe. Classification JEL: D21, D43, L13, L94

Keywords: electricity market; liberalization; market power; oligopoly; market design (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 L94 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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