Ownership Unbundling and Investment in Electricity Markets - A Cross CountryStudy

Publication: Scientific journalJournal articlepeer-review

Abstract

This paper is the first to explicitly test for the presence of a trade-off between static and dynamic efficiency and a trade-off between vertical economies and competition in a regulated industry, the electricity industry. We show for 16 European countries over the period 1998–2008 that higher electricity end-user prices in a country subsequently lead to larger aggregate investments in the capital stock, i.e. in generation, distribution and transmission assets. Moreover, there is a trade-off between vertical economies and competition. Ownership unbundling and forced access to the incumbent transmission grid increases competition but come at the cost of lost vertical economies. Generally, we find that regulation that affects only the market directly, like the establishment of a wholesale market or free choice of suppliers, increases aggregate investment. Regulation, however, that adversely affects the incumbent directly, like ownership unbundling, decreases aggregate investment spending.
Original languageEnglish
Pages (from-to)702 - 713
JournalEnergy Economics
Volume40
DOIs
Publication statusPublished - 2013

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 502034 Regulatory economics

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