 Incumbent’s Bane or Gain? Renewable Support and Strategic Behavior in Electricity MarketsAli Darudi and Hannes Weigt The Energy Journal, 2020, vol. 41, issue 1_suppl, 167-190 Abstract: Incumbent firms play a decisive role in the success of renewable support policies. Their investments in renewables as well as their operational strategies for their conventional CO2 emitting technologies affect the transition to a sustainable energy system. We use a game theoretical framework to analyze incumbents’ reactions to different renewable support policies, namely feed-in tariff (FIT), feed-in premium (FIP), and auction-based policies. We show that a regulator should choose a support scheme based on concerns about either market power or emission abatement: in FIP-based policies, the incumbent’s strategic behavior leads to lower CO2 emissions, but a higher market price compared to FIT-based policies. Furthermore, for FIP-based policies, the regulator might want to incentivize incumbents directly (to further reduce CO2 emissions) or newcomers (to further reduce market power). Particularly in FIP-based auctions, incumbents have the incentive to obtain all auctioned capacity, which could lead to an unchanged market price despite the entrance of new capacity into the market. Keywords: Electricity market; Renewable energy; Support policies; Game theory; Incumbent (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:41:y:2020:i:1_suppl:p:167-190 DOI: 10.5547/01956574.41.SI1.adar Access Statistics for this article More articles in The Energy Journal |
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