CORDIS
EU research results

CORDIS

English EN
Investments in the electricity market: Model and Applications

Investments in the electricity market: Model and Applications

Objective

* Research Objective Many economists are concerned that without regulation, insufficient generation capacity will be built in the liberalized electricity market, given its market failures: markets are incomplete and generators have market power. The aim of this project is to study (1) whether government intervention is required to regulate the security of supply and, if so, (2) what the best regulatory scheme would be. As market power has been studied extensively, we will assume that markets are competitive, but incomplete. * Research methodology 1. We develop a long-run stochastic partial equilibrium model of the electricity market under perfect competition, with risk-averse firms and incomplete forward markets. The model includes production, spot market sales, contracting and investment decisions. The model is expected to show that the lack of a complete set of forward markets leads to underinvestment. 2. We extend the model to include a welfare-maximizing regulator. This regulator has two instruments: (a) it can regulate the risk taking by firms using a ‘capital adequacy regulation’, (b) it can buy peak-load power plants to provide backup power during emergencies fulfilling the role of ‘lender-of-last-resort. The model will determine which regulation is socially beneficial. * Training and Impact This fellowship will allow the researcher to join well-established European researchers to advance the state of the art on regulating investments in network industries. The project will contribute to Europe’s secure energy supply and to the establishment of the fellow as an independent researcher.
Leaflet | Map data © OpenStreetMap contributors, Credit: EC-GISCO, © EuroGeographics for the administrative boundaries

Coordinator

STICHTING KATHOLIEKE UNIVERSITEIT BRABANT

Address

Warandelaan 2
5037 Ab Tilburg

Netherlands

Activity type

Higher or Secondary Education Establishments

EU Contribution

€ 149 568,25

Administrative Contact

Marjoleine De Wit (Ms.)

Project information

Grant agreement ID: 221085

Status

Closed project

  • Start date

    1 September 2008

  • End date

    31 August 2010

Funded under:

FP7-PEOPLE

  • Overall budget:

    € 149 568,25

  • EU contribution

    € 149 568,25

Coordinated by:

STICHTING KATHOLIEKE UNIVERSITEIT BRABANT

Netherlands