Market Signals and Investment in Variable Renewables

Oliveira, Tiago

doi:10.2139/ssrn.2695596

Cited by 3 publications

(2 citation statements)

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“…Our paper differs from Oliveira's (2015) analysis in several ways. We introduce forward markets, which play an important role on firm behavior.…”

Section: Related Literaturementioning

confidence: 85%

“…Several recent articles consider the implications of wholesale market power on the effectiveness of different forms of renewable compensation. In a closely related study, Oliveira (2015) considers a two-stage model in which firms with exogenous conventional generation capacity first choose investments in renewable capacity, and then act as Cournot competitors in the spot market. 5 The author compares outcomes when renewable generation is compensated by a fixed-priced versus a premium-priced FIT.…”

Section: Related Literaturementioning

confidence: 99%

See 1 more Smart Citation

Imperfect Competition in Electricity Markets with Renewable Generation: The Role of Renewable Compensation Policies

Brown¹,

Eckert²

2020

The Energy Journal

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We analyze the effects of commonly employed renewable compensation policies on firm behavior in an imperfectly competitive market. We consider a model where firms compete for renewable capacity in an auction prior to choosing their forward positions and competing in wholesale markets. We focus on fixed and premium-priced feed-in tariff (FIT) compensation policies. We demonstrate that compensation policies impact both the types of resources that win the auction and subsequent competition. While firms have stronger incentives to exercise market power under a premium-priced FIT, they also have increased incentives to sign pro-competitive forward contracts. In net firms have stronger incentives to exercise market power under the premium-priced policy. We find conditions under which renewable resources that are more correlated with market demand are procured under a premium-priced design, while the opposite occurs under a fixed-priced policy. If the cost efficiencies associated with the "more valuable" renewable resources are sufficiently large, then welfare is higher under the premium-priced policy despite the stronger market power incentives in the wholesale market.

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“…Our paper differs from Oliveira's (2015) analysis in several ways. We introduce forward markets, which play an important role on firm behavior.…”

Section: Related Literaturementioning

confidence: 85%

Section: Related Literaturementioning

confidence: 99%