Contract market power and its impact on the efficiency of the electricity sector
Author
dc.contributor.author
Serra Banfi, Pablo
Admission date
dc.date.accessioned
2014-12-18T01:11:20Z
Available date
dc.date.available
2014-12-18T01:11:20Z
Publication date
dc.date.issued
2013
Cita de ítem
dc.identifier.citation
Energy Policy Volume 61, October 2013, Pages 653–662
en_US
Identifier
dc.identifier.other
doi:10.1016/j.enpol.2013.06.058
Identifier
dc.identifier.uri
https://repositorio.uchile.cl/handle/2250/128703
General note
dc.description
Artículo de publicación SCOPUS
en_US
Abstract
dc.description.abstract
This paper analyzes the pro-competitive effects of financial long-term contracts in oligopolistic electricity markets. This is done in a model that incorporates the main features of the industry: non-storable production, time-varying price-elastic demand, and sequential investment and production decisions. The paper considers contracts for difference that have as reference price the average spot price. Assuming that the spot market coordinator sets competitive prices, the paper shows that installed capacity increases with the quantity of energy contracted, reaching the welfare-maximizing capacity when energy contracted equals this same level. Next, the paper studies the case where the quantity of energy contracted is endogenous and contracts are traded before capacity decisions are taken. Regarding purchasers of contracts, two polar cases are considered: either they are price-taker speculators or they are an aggregation of consumers that auctions a long (buy) contract for a given energy quantity. In the former case the strike price equals the reference price, i.e., arbitrage is perfect, and the quantity of energy contracted falls short of the efficient level. In turn, in the latter case, the strike price equals the average efficient spot price. Moreover, an aggregation of all consumers would choose to auction the social optimum quantity.