Renewable sources, technology mix, and competiton in liberalized electricity markets: the case of Spain
- Ciarreta Antuñano, Aitor
- Gutiérrez Hita, Carlos
- Georgantzis, Nikolaos
Year of publication: 2010
Issue: 6
Type: Working paper
Sustainable development goals
Abstract
The paper addresses the question of how oligopolistic competition is affected by the development of renewable source technologies within the new framework of electricity supply security and reduction of emissions of CO2. In an oligopoly model where firms own renewable as well as non-renewable source technologies, we show that wholesale prices tend to decline the larger the efficiency achieved by renewable technologies depending also on the feed-in-tariff fixed by regulators. We found however that a high subsidy can distort competition when technical maturity of renewables is large as compared with the costs incurred by fossil sources. Finally, we test the predictions of the model using data from the Spanish electricity market.