Electricity markets and oligopolistic behaviors: The impact of a multimarket structure

Boroumand, Raphaël Homayoun

doi:10.1016/j.ribaf.2014.04.004

Cited by 23 publications

(18 citation statements)

References 15 publications

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“…Development models based on external ownership and limited local benefit have been increasingly challenged in many countries. Energy generation and supply across Europe is still dominated by just a handful of multinational companies (Darmani et al, 2016;Corscadden, 2018), and this is widely recognized as a serious problem for both energy affordability and the transition to cleaner energy systems (e.g., Barquin et al, 2006;Boroumand, 2015;Kungl, 2015;Ciarreta et al, 2016;Magnusson, 2016). While national governments may be unable or unwilling to contemplate direct intervention, regional and local scale administrations face no such difficulty, and in Germany, for example, there has been a concerted drive to bring energy generation and supply back under local public control through "re-municipalization" (Wagner and Berlo, 2017).…”

Section: Future Pathways: Ce As a Road To Energy Democracy?mentioning

confidence: 99%

Social Innovation in Community Energy in Europe: A Review of the Evidence

et al. 2019

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Citizen-driven Renewable Energy (RE) projects of various kinds, known collectively as community energy (CE), have an important part to play in the worldwide transition to cleaner energy systems. On the basis of evidence from 8 European countries, we investigate CE, over approximately the last 50 years (c.1970-2018), through the lens of Social Innovation (SI). We carry out a detailed review of literature around the social dimension of renewable energy; we collect, describe and map CE initiatives from Belgium, and the UK; and we unpack the SI concept into 4 operational criteria which we suggest are essential to recognizing SI in CE. These are: (1) Crises and opportunities; (2) the agency of civil society; (3) reconfiguration of social practices, institutions and networks; (4) new ways of working. We identify three main phases of SI in CE. The environmental movements of the 1960s and the "oil shocks" of the 1970s provided the catalyst for a series of innovative societal responses around energy and self-sufficiency. A second wave of SI relates to the mainstreaming of RE and associated government support mechanisms. In this phase, with some important exceptions, successful CE initiatives were mainly confined to those countries where they were already embedded as innovators in the previous phase. The third phase of CE innovation relates to the societal response to the Great Recession that began in 2008 and lasted most of the subsequent decade. CE initiatives formed around this time were also strongly focused around democratization of energy and citizen empowerment in the context of rising energy prices, a weak economy, and a production and supply system dominated by excessively powerful multinational energy firms. CE initiatives today are more diverse than at any time previously, and are likely to continue to act as incubators for pioneering initiatives addressing virtually all aspects of energy. However, large multinational energy firms remain the dominant vehicle for delivery of the energy transition, and the apparent excitement in European policy circles for "community energy" does not extend to democratization of energy or genuine empowerment of citizens.

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Section: Future Pathways: Ce As a Road To Energy Democracy?mentioning

confidence: 99%

Social Innovation in Community Energy in Europe: A Review of the Evidence

et al. 2019

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“…This result is even more surprising if we consider the margin rate (i.e., the margins to retail price ratio): it varies from 14% to more than 50%. Such high margins, even considering other regulated or monopolistic industries (see Porcher [2014] [15] for a literature review on the margins in the French water public service, and Boroumand [2015] for the electricity sector), confirm the suspicious cartelization of the market. The variations in the margins outline different phases of competition and cartelization of the market.…”

Section: Datamentioning

confidence: 98%

A Conditional Markov Regime Switching Model to Study Margins: Application to the French Fuel Retail Markets

Boroumand¹,

Goutte²,

Porcher³

et al. 2015

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<p class="ESRBODY">This paper uses a regime-switching model that is built on mean-reverting and local volatility processes combined with two Markov regime-switching processes to understand the market structure of the French fuel retail market over the period 1990-2013. The volatility structure of these models depends on a first exogenous Markov chain, whereas the drift structure depends on a conditional Markov chain with respect to the first one. Our model allows us to identify mean reverting and switches in the volatility regimes of the margins. In the standard model of cartel coordination, volatility can increase competition. We find that cartelization is even stronger in phases of high volatility. Our best explanation is that consumers consider volatility in prices to be a change in market structure and are therefore less likely to search for lower-priced retailers, thus increasing the market power of the oligopoly. Our findings provide a better understanding of the behavior of oligopolies.</p>

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“…Without efficient intra-day instruments, retailers are incited to vertically integrate which subsequently prevent the development of liquid intraday options in a setting of vicious circle. With dominant vertically integrated retailers in most countries, the contribution of electricity retail markets to the global performance of the electricity industry would remain very weak (Boroumand, 2015) given the lack of competition and weak consumers commitment to the market. Retail market liberalization was a huge institutional shock for electricity markets.…”

Section: Conclusion and Policy Recommendationsmentioning

confidence: 99%

“…In the residential sector, suppliers must serve fluctuating loads at prices that are usually fixed, and given their 'obligation to serve', they cannot curtail delivery (Boroumand and Zachmann, 2012;Bushnell et al, 2008). As market intermediaries, electricity suppliers have the contractual obligation to balance their procurement and sales portfolios without the lever of storage (Boroumand, 2015). The economic non-storability of (large) electricity volumes contributes to making electricity market intermediation very specific.…”

Section: Introduction and Literature Reviewmentioning

confidence: 99%

Potential benefits of optimal intra-day electricity hedging for the environment: The perspective of electricity retailers

et al. 2019

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Our article provides a better understanding of risk management strategies for all energy market stakeholders. A good knowledge of optimal risk hedging strategies is not only important for energy companies but also for regulators and policy makers in a context of climate emergency. Indeed, the electricity sector is key to achieve energy and ecological transition. Electricity companies should be on frontline of climate change struggle. Taking the perspective of electricity retailers, we analyze a range of portfolios made of forward contracts and/or power plants for specific hourly clusters based on electricity market data from the integrated German-Austrian spot market. We prove that intra-day hedging with forward contracts is sub-optimal compared to financial options and physical assets. By demonstrating the contribution of intra-day hedging with options and physical assets, we highlight the specificities of electricity markets as hourly markets with strong volatility during peak hours. By simulating optimal hedging strategies, our article proposes a range of new portfolios for electricity retailers to manage their risks and reduce their sourcing costs. A lower hedging cost enables to allocate more resources to digitalization and energy efficiency services to take into account customers' expectations for more climate-friendly retailers. This is a virtuous circle. Retailers provide high value-added energy efficiency services so that consumers consume less. The latter contributes to reach electricity reduction targets to fight climate warming.

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Electricity markets and oligopolistic behaviors: The impact of a multimarket structure

Cited by 23 publications

References 15 publications

Social Innovation in Community Energy in Europe: A Review of the Evidence

Social Innovation in Community Energy in Europe: A Review of the Evidence

A Conditional Markov Regime Switching Model to Study Margins: Application to the French Fuel Retail Markets

Potential benefits of optimal intra-day electricity hedging for the environment: The perspective of electricity retailers

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