Market Power in Markets for Power
Public DepositedI study how electricity generation firms exert market power, raising price above marginal cost. Typical studies of market power in electricity markets focus on how firms sustain markups in the short-run energy market. I explore other channels electricity generation firms use to strategically maximize profits. First, I analyze strategic investments and disinvestments. I find that firms with market power choose a portfolio of generators which significantly departs from a least-cost planner's optimal portfolio. Next, I test if firms that have common owners, which gives them less incentive to compete, sustain higher markups. I find evidence of this effect using a reduced-form approach, but a structural approach has less convincing conclusions. Finally, I study the capacity market, a relatively new market where generators can earn extra revenue. In a stylized model, I find that current capacity market designs result in overpaying for capacity. I then use a regulatory feature of the PJM electricity market to analyze if higher capacity prices do indeed drive higher net investment, and I find no convincing evidence.
- Last modified
- 04/01/2019
- Creator
- DOI
- Subject
- Keyword
- Date created
- Resource type
- Rights statement
Relationships
Items
Thumbnail | Title | Date Uploaded | Visibility | Actions |
---|---|---|---|---|
|
Myatt_northwestern_0163D_14149.pdf | 2019-04-01 | Public |
|