Capacity choices in liberalised electricity market

25 septembre 2007, de 11h30 heures à 13 heures

GIS LARSEN, campus de Fontenay aux Roses

Intervenant : Georges Siotis, professeur d’économie associé à l’Université Carlos III, Madrid et chercheur associé au CEPR.

Slides de la présentation

Résumé : We develop a theoretical model of long-run investment decisions in capacity in the context of a liberalised electricity market. The sector’s idiosyncrasies such as the uncertainty surrounding future demand as well as technological constraints are explicitly modelled. We derive the level of capacity that maximizes social welfare, and compare it to a decentralised outcome. It is shown that in the absence of any regulation, private investment decisions in capacity unambiguously lead to a socially sub-optimal outcome, and we illustrate these results with simulations based on Spanish data. Last, we show that two regulatory mechanisms that have been used to generate additional incentives for private agents to install and maintain capacity (capacity payment and price-adder) are ine.ective and/or prohibitively costly.

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