The Energy Journal · 2009 · 108 citations · 21 references
Natural ResourcesBusiness EconomicsEconomicsEnergy EconomicsEnergy PolicyEnvironmental EconomicsCarbon PricingElectricity MarketsEmissions TradingEnergy PricingEnergy TariffsRenewable EnergyElectricity Market AnalysisElectricity Price FormationFeed-in Tariff AnalysisFeed-in Tariff ContractsFeed-in Tariff PricingOligopolistic CompetitionPrice-cost Margin AnalysisRenewable Energy Tariffs
Most models used to analyze renewable electricity support policies ignore key market features such as oligopolistic behavior, emission trading, and limited cross‑border transmission capacities. We employ a quantitative electricity market model that incorporates these features and separate the German Feed‑in Tariff’s impact into a substitution effect and a permit‑price effect. The FIT raises German consumer prices by about three percent, lowers producer prices by eight percent, cuts German electricity emissions by eleven percent with negligible European impact, and increases firms’ price‑cost margins but reduces profits unless they combine carbon‑intensive production with weak grid connectivity.
Most models that are used to analyze support policies for renewable electricity neglect important market features like oligopolistic behavior, emission trading, and restricted cross-border transmission capacities. We use a quantitative electricity market model that accounts for these aspects and decompose the impact of the German Feed-in tariff (FIT) into two frequently counteracting effects: a substitution effect and a permit price effect. We find that the total effect of the policy increases the German consumer price slightly by three percent, while the producer price decreases by eight percent. In addition, emissions from electricity generation in Germany are reduced by eleven percent but are hardly altered on the European scale. Finally, it turns out that price-cost margins of almost all firms are increased by the FIT, while nonetheless, the profits of firms are significantly lowered unless the firms combine relatively carbon-intensive production with a weak connection to the German grid.
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Competition in the British Electricity Spot Market
David Newbery · Journal of Political Economy · 1992 · 1.4K citations