Entry into the electricity market: Uncertainty, competition, and mothballing options

Ryuta Takashima, Makoto Goto, Hiroshi Kimura and Haruki Madarame

Energy Economics, 2008, vol. 30, issue 4, 1809-1830

Abstract: The present paper analyzes the entry strategies into the electricity market of two firms that have power plants under price uncertainty and competition. We consider the symmetric and asymmetric two firms, which have either a thermal power plant or a nuclear power plant. The differences between the thermal power plant and the nuclear power plant, such as the cost structure and operational flexibility are modeled. The threshold values of market entry are calculated for each firm with either the thermal power plant or the nuclear power plant as the leader or the follower. We show the dependence of cost structures on entry thresholds of the leader and the follower into the electricity market. For various market and cost conditions, the diagrams of the leader are also shown.

Date: 2008
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