We consider electricity generation industries where thermal operators imperfectly compete with hydro operators that manage a (scarce) water stock stored in reservoirs over a natural cycle. We explore how the exercise of intertemporal market power affects social welfare and environmental quality. We show that, as compared to the outcome of spot markets, long-term contracting either exacerbates or alleviates price distortions, depending upon the consumption pattern over the water cycle. Moreover, it induces a second-order environmental effect that, in the presence of a thermal competitive fringe, is critically related to the thermal market shares in the different periods of the cycle. We conclude by providing policy insights.
Long-term contracting in hydro-thermal electricity generation: Welfare and environmental impact / E. BILLETTE DE VILLEMEUR; A. VINELLA. - In: UTILITIES POLICY. - ISSN 0957-1787. - 19(2011), pp. 20-32.
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Titolo: | Long-term contracting in hydro-thermal electricity generation: Welfare and environmental impact |
Autori: | |
Data di pubblicazione: | 2011 |
Rivista: | |
Citazione: | Long-term contracting in hydro-thermal electricity generation: Welfare and environmental impact / E. BILLETTE DE VILLEMEUR; A. VINELLA. - In: UTILITIES POLICY. - ISSN 0957-1787. - 19(2011), pp. 20-32. |
Abstract: | We consider electricity generation industries where thermal operators imperfectly compete with hydro operators that manage a (scarce) water stock stored in reservoirs over a natural cycle. We explore how the exercise of intertemporal market power affects social welfare and environmental quality. We show that, as compared to the outcome of spot markets, long-term contracting either exacerbates or alleviates price distortions, depending upon the consumption pattern over the water cycle. Moreover, it induces a second-order environmental effect that, in the presence of a thermal competitive fringe, is critically related to the thermal market shares in the different periods of the cycle. We conclude by providing policy insights. |
Handle: | http://hdl.handle.net/11586/107328 |
Appare nelle tipologie: | 1.1 Articolo in rivista |