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Renewable Energy Policy Instruments and Market Power
Author(s) -
der Fehr NilsHenrik M.,
Ropenus Stephanie
Publication year - 2017
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12188
Subject(s) - stylized fact , renewable energy , inefficiency , economics , competitor analysis , industrial organization , vertical integration , electricity , feed in tariff , market power , electricity market , margin (machine learning) , business , commerce , microeconomics , energy policy , monopoly , engineering , computer science , electrical engineering , macroeconomics , management , machine learning
Markets for green certificates allow generators with market power to squeeze the margins of their competitors, as a generator that is vertically integrated into network activities might do. We analyze this issue in a stylized electricity industry in which a dominant producer of both conventional and renewable energy is facing a competitive fringe of renewable‐energy producers. We demonstrate that whether or not a dominant firm is vertically integrated into network activities, it can disadvantage the fringe producers by distorting certificates prices, thereby inducing cost inefficiency in the generation of renewable energy. We compare green certificates to a system of feed‐in tariffs, where a similar margin squeeze is not possible.