Working Paper No. 1184

The Competitive Effects of Linking Electricity Markets Across Space and Time

Published: October 17, 2017Pages: 41Keywords: Electricity markets; Equity; Market design; Market performance; Market power; Vertical integrationJEL-codes: C72, D43, G10, G13, L13

The Competitive Effects of Linking Electricity Markets Across Space and Time Thomas Tangerås and Frank A. Wolak


We show that a common regulatory mandate in electricity markets that use location-based pricing that requires all customers to purchase their wholesale electricity at the same quantity-weighted average of the locational prices can increase the performance of imperfectly competitive wholesale electricity markets.

Linking locational markets strengthens the incentive for vertically integrated firms to participate in the retail market, which increases competition in the short-term wholesale market. In contrast, linking locational markets through a long-term contract that clears against the quantity-weighted average of short-term wholesale prices does not impact average wholesale market performance.

These results imply that a policy designed to address equity considerations can also enhance efficiency in wholesale electricity markets.

Thomas Tangerås

Contact

Ph: +46 8 665 4526
Mob: +46 70 727 5448
thomas.tangeras@ifn.se

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

Omslag 2017 Institutional Reform for Innovation and Entrepreneurship.jpg

The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

Events

Seminars organized by IFN

 

To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se