Technology Policy and Market Structure: Evidence from the Power Sector
Moritz Bohland and
No 1856, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research
We show how policies to trigger clean technologies change price competition and market structure. We present evidence from electricity markets, where regulators have implemented diﬀerent policies to subsidize clean energy. Building on a multi-unit auction model, we show that currently applied subsidy designs either foster or attenuate competition. Fixed, price-independent output subsidies decrease ﬁrms’ mark-ups. In contrast, designs that subsidize clean output via a regulatory premium on the market price lead to higher mark-ups. We conﬁrm this ﬁnding empirically using auction data from the Spanish power market. Our empirical results show that the design choice for technology subsidies signiﬁcantly impacts pricing behavior of ﬁrms and policy costs for consumers
Keywords: Subsidies; Clean Energy; Pricing; Electricity (search for similar items in EconPapers)
JEL-codes: D22 D44 D47 (search for similar items in EconPapers)
Pages: 30 p.
New Economics Papers: this item is included in nep-com, nep-ene, nep-eur and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp1856
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