The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market

Wolak, Frank A.; Patrick, Robert H.

doi:10.3386/w8248

Cited by 100 publications

(93 citation statements)

References 2 publications

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“…It must be noted that, in their model, prices only reach the Cournot level when demand is highest, and can be considerably below on average. Second, Wolak and Patrick (1996) argue that firm will not use prices as their strategic variable because bids that are significantl above cost will trigger a response by the regulator, and thus firm will use capacity as a strategic variable. Yet, it seems that the regulator is likely to respond to strategic use of capacity availability declarations (as it did in the England and Wales case), and that declaring a generator unavailable is a very crude mechanism for adjusting capacity given the demand variation that might exist in a 24 h period.…”

Section: Introductionmentioning

confidence: 99%

Strategic bidding in electricity pools with short-lived bids: an application to the Spanish market

Garcı́a-Dı́az

Marı́n

2003

International Journal of Industrial Organization

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We generalize von der Fehr and Harbord's [Econ. J. 103 (1993) 531] multi-unit auction model for the case of a deterministic demand allowing for any technology mix and elastic demand in order to account for demand-side bidding. We obtain a general characterization of the equilibrium and show that this is bounded above by the Cournot equilibrium. We simulate the Spanish electricity pool and show that price-cost margins substantially increased with the 1996 merger that took the industry from a six-firm structure to its current four-firm structure. Our results show that, in terms of market power, this is similar to a nearly symmetric duopoly. The introduction of demand-side bidding is not likely to change this situation.JEL classificatio : L13; L94; K23

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Section: Introductionmentioning

confidence: 99%

Strategic bidding in electricity pools with short-lived bids: an application to the Spanish market

Garcı́a-Dı́az

Marı́n

2003

International Journal of Industrial Organization

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“…Holmberg et al (2008) show that a multi-unit discrete supply function equilibrium might converge to the continuous supply function concept. 6 This choice is supported by an empirical study of Wolak and Patrick (2001) who suggest that Cournot competition is an appropriate representation of the electricity generation market. Willems et al (2009) compare supply function equilibria and Cournot models and show that In this paper generators behave à la Cournot in the energy market but are price takers in the transmission market.…”

Section: Modeling Market Powermentioning

confidence: 63%

Cost Recovery in Congested Electricity Networks

Pepermans¹,

Willems

2010

Z Energiewirtsch

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Large scale investments in European electricity networks are foreseen in the next decade. Pricing the network at marginal cost will not be sufficient to pay for those investments as the network is a natural monopoly. This paper derives numerically the socially optimal transmission prices for cost recovery, taking into account that electricity networks are often congested, while allowing for market power in generation. The model is illustrated with a Stackelberg game for the Belgian electricity market.

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“…In contrast, in the West, Wolak and Patrick (1996) found that the major generators in the UK could increase their profits by unilaterally restricting the amount of generation capacity available for the market. Such argument is also supported by the study on the California electricity market by Borenstein and Bushnell (1999).…”

Section: Electricity Prices Power Consumption and Capacitymentioning

confidence: 99%

The Chinese electricity industry: supply capacity and its determinants with reference to OECD countries

Liu

Zhang

Girardin

2014

Journal of Chinese Economic and Business Studies

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The paper takes two-stage estimation to investigate the direct and indirect determinants of the capacity of power supply in China, with reference to OECD countries. In the first stage we investigate the determinants of demand for electric consumption and in the second stage we test the impact of demand for consumption on capacity. Our study shows that the direct impact on capacity growth is mainly of GDP growth which is a China-specific effect, and load factor which is a non-China specific effect. Capacity investment is driven by demand for power relative to the use of existing capacity. Furthermore, power prices and the industrial structure of an economy are the indirect determinant of capacity via their impacts on demand. The industrial structure is particularly strong for affecting power demand in China, since the country has quickened industrialization with more investment in heavy industry that further fuels up demand for power and so capacity.

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The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market

Cited by 100 publications

References 2 publications

Strategic bidding in electricity pools with short-lived bids: an application to the Spanish market

Strategic bidding in electricity pools with short-lived bids: an application to the Spanish market

Cost Recovery in Congested Electricity Networks

The Chinese electricity industry: supply capacity and its determinants with reference to OECD countries

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