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The impact of energy market mergers on “green†producers' cost efficiency incentives: some preliminary results

Author

Listed:
  • Kevin Currier

    (Oklahoma State University)

  • Susanne Rassouli-Currier

    (University of Central Oklahoma)

Abstract

Employing a highly stylized model of an energy oligopoly, we examine the cost efficiency incentives facing renewable energy (RE) (i.e., green) producers under a RE quota implemented via a Feed-in Tariff. In addition, we examine some implications of these incentives. We show that under Cournot competition, green producers have limited incentives to exploit learning-by-doing cost savings, but that a merger between the green producer and a fossil-fuel based (“black†) producer can fully restore these incentives. As expected, the merger leads to higher consumer prices ceteris paribus. However, the enhanced post-merger incentives to exploit cost reduction potential in the green technology leads to lower consumer prices. Policy makers should consider these potential impacts when assessing the potential costs and benefits of mergers between green and black energy producers.

Suggested Citation

  • Kevin Currier & Susanne Rassouli-Currier, 2016. "The impact of energy market mergers on “green†producers' cost efficiency incentives: some preliminary results," Economics Bulletin, AccessEcon, vol. 36(4), pages 2474-2481.
    • Handle: RePEc:ebl:ecbull:eb-16-00613
    as

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    References listed on IDEAS

    as
    1. Currier, Kevin M., 2016. "Incentives for cost reduction and cost padding in electricity markets with overlapping “green” regulations," Utilities Policy, Elsevier, vol. 38(C), pages 72-75.
    2. Couture, Toby & Gagnon, Yves, 2010. "An analysis of feed-in tariff remuneration models: Implications for renewable energy investment," Energy Policy, Elsevier, vol. 38(2), pages 955-965, February.
    3. Russell Pittman, 2007. "Consumer Surplus as the Appropriate Standard for Antitrust Enforcement," EAG Discussions Papers 200709, Department of Justice, Antitrust Division.
    4. Russ Pittman, 2007. "Consumer Surplus as the Appropriate Standard for Antitrust Enforcement," CPI Journal, Competition Policy International, vol. 3.
    5. Christoph Böhringer & Knut Rosendahl, 2010. "Green promotes the dirtiest: on the interaction between black and green quotas in energy markets," Journal of Regulatory Economics, Springer, vol. 37(3), pages 316-325, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Renewable Energy; Cost Incentives; Mergers; Feed-in Tariff; Green Quota;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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