Munich Personal RePEc Archive

Regulation and electricity market integration: When trade introduces inefficiencies

Billette de Villemeur, Etienne and Pineau, Pierre-Olivier (2012): Regulation and electricity market integration: When trade introduces inefficiencies. Published in: Energy Economics , Vol. 34, : pp. 529-535.

[img]
Preview
PDF
MPRA_paper_41251.pdf

Download (226Kb) | Preview

Abstract

Electricity markets vary greatly across jurisdictions, in terms of regulatory institutions, cost levels and environmental impacts. Integrating such different markets can lead to significant changes. This paper considers two jurisdictions - one with a regulated monopoly selling at average cost and one with a competitive market - and compares three different institutional regimes: autarky, a mixed-market structure with trade and a fully integrated market, where electricity is sold at marginal cost. We show that, in the second regime, the regulated monopoly always exports toward the jurisdiction pricing at marginal cost, up to inducing productive inefficiencies. By contrast, a shift from the second to the third regime, i.e. "integrated deregulation" yields a decrease in overall consumption. We identify the exact conditions under which the shift from one regime to the other results in environmental gains.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.