Electricity Prices during the Energy Crisis in Germany: The Role of Market Power

Till Fladung and Anna Saile

No 414, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: During the energy crisis in 2022, electricity prices in Germany soared to unprecedented levels. To explore the drivers of the high electricity prices, we develop an electricity dispatch model that simulates hourly equilibrium prices under the assumption of perfect competition. We then extend this model to account for firms exercising market power. By comparing the outcomes of the perfect competition and Cournot competition models with actual market data, we demonstrate that market power may contributed to higher prices during the crisis, elevating them beyond what rising input costs alone would justify.

Keywords: Energy Economics; Market Power; Energy Crisis; Electricity Prices; Cournot Competition (search for similar items in EconPapers)
JEL-codes: D43 L13 L94 Q41 Q43 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-com, nep-ene, nep-gth, nep-ind and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ifowps:_414

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