Excessive entry and investment in deregulated markets: Evidence from the electricity sector

Alexander Hill

Journal of Environmental Economics and Management, 2021, vol. 110, issue C

Abstract: The staggered and partial restructuring of state electricity markets beginning in 1996 is leveraged to identify the effect of entry deregulation on investment in generation capacity during the U.S. Gas Boom. Using synthetic control to construct the counterfactual outcome, this paper finds restructuring led to a 17 percent increase in capacity beyond the counterfactual in the seven years following restructuring. The overinvestment of the electricity industry is consistent with market coordination failure, contagion and low real interest rates, leading to an environmental welfare gain of $27.6 billion but overall net welfare loss of $18.85 billion.

Keywords: Gas Boom; Electricity restructuring; Excessive investment (search for similar items in EconPapers)
JEL-codes: L22 L51 L94 Q40 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:110:y:2021:i:c:s0095069621001030

DOI: 10.1016/j.jeem.2021.102543

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