What is the strategic value of investments in alternative local energy supply?

Gerd Kupper

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: This paper studies strategic incentives to invest in electricity generation capacity using a local fuel like renewables or coal. It shows that investing in this capacity, even if not used, improves the bargaining position of a power producing firm that also imports another fuel such as gas. When several importers are considered, the paper finds that investment has a positive strategic effect on all other importers’ bargaining position. A government energy policy that forces utilities to invest in capacity based on particular fuels can be justified not only for environmental but also for strategic reasons.

JEL-codes: C78 Q40 Q48 Q50 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-ene, nep-env and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces10.04

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