Market Power and Heterogeneous Pass-Through in German Electricity Retail

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe analyze the pass-through of cost changes to retail tariffs in the German electricity market over the 2007 to 2014 period. We find an average pass-through rate of around 60%, which significantly varies with demand factors: while the pass-through rate to baseline tariffs, where firms have higher market power, is only 50%, it increases to 70% in the competitive segment of the market. Although the pass-through rate of independent firms is significantly higher than that of other firms in the competitive market segment, the extent of supply-side heterogeneity is limited. Thus, the firms' ability to exercise market power appears to be constrained by competition and largely determined by demand side factors. Finally, we find that the pass-through rate in the competitive market segment has been approaching unity over the past years, indicating a rise in competitive pressure.

Abuse of Dominance and Antitrust Enforcement in the German Electricity Market

“…Specifically, it was determined by two factors: i) prioritized feed-in of renewables -especially the two predominant types of wind and photovoltaic generation -and ii) the monetary compensation via a regulated price mechanism. Hence, both this regulatory framework as well as the random nature of resource 6 Indeed, Duso and Szücs (2017) show that changes in German electricity wholesale prices are, to a substantial degree, passed on to consumers. availability of wind and solar render renewable electricity supply to be a quasi-exogenous supplyshock in the market system.…”