Vertical economies in electric power: evidence on integration and its alternatives

Kwoka, John E.

doi:10.1016/s0167-7187(00)00114-4

Cited by 121 publications

(117 citation statements)

References 12 publications

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“…E cient management of the electricity supply system requires careful coordination across the vertical stages of the supply chain both in operation and with respect to investment decisions. This has been analysed in detail for transmission networks in the seminal work of Joskow & Schmalensee (1983) and confirmed empirically (see for example Nemoto & Goto, 2004;Kwoka, 2002;Kaserman & Mayo, 1991). Meyer (2011) provides a recent empirical and theoretical overview of vertical synergies at transmission level.…”

Section: Disadvantages Of Unbundling: Transaction Costs and Coordinationmentioning

confidence: 80%

Governing smart grids: the case for an independent system operator

Friedrichsen¹

2012

Eur J Law Econ

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Governing smart grids -the case for an independent system operator Governing smart grids -the case for an independent system operator Nele Friedrichsen † November 4, 2011 AbstractThe next years should bring about a rapid transformation of the electricity sector towards high levels of renewable generation. Smart grids are seen as the silver bullet responding to the challenge of integrating renewables, managing flexibility, and keeping the costs down in distribution networks. Network unbundling on the other hand is essential for competition in the liberalized electricity industry. It forces independence of the networks and thereby eliminates concern that incumbent integrated (network) firms discriminate against new entrants. With smart grids the unbundling questions become relevant for distribution networks because active control in smart grids entails discrimination potentials. However, smart grids exhibit coordination needs for system e ciency and unbundling eliminates firm-internal coordination. An independent system operator seems to be an appropriate compromise solution. It eliminates discrimination incentives and serves coordination needs, thereby striking a balance between both competition and e ciency goals.

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Section: Disadvantages Of Unbundling: Transaction Costs and Coordinationmentioning

confidence: 80%

Governing smart grids: the case for an independent system operator

Friedrichsen¹

2012

Eur J Law Econ

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“…These articles focus on market design and the effects that privatization and regulation rules have on such markets. 8 See for example, Kwoka (2002) who looks at alternative vertical structures in the US electric market.…”

Section: Literature Reviewmentioning

confidence: 99%

Vertical separation vs. independent downstream entry in an electricity network: Experimental insights

Ciarreta

Fatás

Georgantzı́s

et al. 2017

Electric Power Systems Research

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We analyze a realistic simulation of a complex electricity network. We obtain the data with a series of experimental sessions designed to closely replicate the Spanish Electricity Market. In the experiments reported here we compare the status quo with two alternative regulatory market structures. In one of them, labeled as vertical separation, we impose that power generating firms and electricity distributors operate as independent business groups. In the second, we study the effect of entry by independent end-suppliers. Both alternative scenarios dominate the status quo in terms of market efficiency, but the latter of them dominates the former.

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“…As in Sing (1987), Kwoka (2002), Filippini, Hrovatin et al (2004) and Fraquelli, Piacenza et al (2005) customer density is introduced as a service area characteristic.…”

Section: Model Specificationmentioning

confidence: 99%

“…8 Following Kwoka (2002), the share of the sales to end consumers has also been introduced in the cost model. In fact, distribution to end consumers needs more transformation and more infrastructures compared with distribution to resellers, and is therefore assumed to be related to higher losses and higher costs.…”

Section: Model Specificationmentioning

confidence: 99%

“…5 Despite its policy importance, only a few studies have estimated directly the economies of vertical integration in the electricity sector. Kaserman and Mayo (1991), Kwoka (2002), and Isaacs (2006) estimated a quadratic multi-stage cost function for a cross section of US electricity companies. Jara-Diaz, Martinez-Budria et al (2004) estimated a quadratic multi-stage cost function for a sample of Spanish electricity companies using panel data, whereas Fraquelli, Piacenza et al (2005) estimated a composite multi-stage cost function with a log-quadratic input price structure and a quadratic output structure using panel data for a sample of Italian utilities.…”

Section: Introductionmentioning

confidence: 99%

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Economies of vertical integration in the Swiss electricity sector

Fetz

Filippini

2010

Energy Economics

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Over the last two decades, several European nations have introduced reforms to their electricity sector. Generally, these reforms require a legal and functional unbundling of vertically integrated companies. These unbundling processes may reduce the possibilities that exist to fruitfully exploit the advantages of vertical integration.The goal of this paper is to empirically analyze the presence of economies of scale and vertical integration in the Swiss electricity sector. Economies of vertical integration between electricity production and distribution result from reduced transaction costs, better coordination of highly specific and interdependent investments and less financial risk. Different econometric specifications for panel data, including a random effects and a random-coefficients model, have been used to estimate a quadratic multi-stage cost function for a sample of electricity companies.The empirical results reflect the presence of considerable economies of vertical integration and economies of scale for most of the companies considered in the analysis. Moreover, the results suggest a variation in economies of vertical integration across companies due to unobserved heterogeneity.JEL Classification: C33, D24, L11, L25, L94, L95 1 We gratefully acknowledge the insightful comments and help from Mehdi Farsi. All remaining errors and omissions are ours.The views expressed in this paper do not necessarily reflect the position of any sponsoring agency.2

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Vertical economies in electric power: evidence on integration and its alternatives

Cited by 121 publications

References 12 publications

Governing smart grids: the case for an independent system operator

Governing smart grids: the case for an independent system operator

Vertical separation vs. independent downstream entry in an electricity network: Experimental insights

Economies of vertical integration in the Swiss electricity sector

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