Long-term contracting in hydro-thermal electricity generation: Welfare and environmental impact

Etienne Billette de Villemeur and Annalisa Vinella

Utilities Policy, 2011, vol. 19, issue 1, 20-32

Abstract: We consider electricity generation industries where thermal operators imperfectly compete with hydro operators that manage a (scarce) water stock stored in reservoirs over a natural cycle. We explore how the exercise of intertemporal market power affects social welfare and environmental quality. We show that, as compared to the outcome of spot markets, long-term contracting either exacerbates or alleviates price distortions, depending upon the consumption pattern over the water cycle. Moreover, it induces a second-order environmental effect that, in the presence of a thermal competitive fringe, is critically related to the thermal market shares in the different periods of the cycle. We conclude by providing policy insights.

Keywords: Hydropower; Thermal; power; Water; allocation; Environmental; externalities; Long-term; contracts (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0957-1787(10)00040-8
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Long-term contracting in hydro-thermal electricity generation: welfare and environmental impact (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:juipol:v:19:y:2011:i:1:p:20-32

Access Statistics for this article

Utilities Policy is currently edited by Beecher, Janice

More articles in Utilities Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().