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Impacts of integration of production of black and green energy

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  • Zhou, Huizhong
  • Tamas, Meszaros Matyas

Abstract

As the mandate for minimum renewable sources renders Tradable Green Certificates (TGCs) an essential input for power generation, it may induce mergers between power companies of conventional and renewable sources. Such mergers enable the integrated firms to extend market power from the TGC market to the physical energy market. We find that the price of TGCs is indeed higher in the integrated market than the disintegrated market, indicating the presence of market power leveraging. However, despite higher TGC price, the total supply of electricity is greater under integration than disintegration, reflecting efficiency gains from vertical integration, which eliminates double marginalization. The thrust of this paper is that market changes induced by environmental policies will in turn affect environmental and economic regulations. For example, increased supply resulting from integration induced by the renewable source mandate may reduce the effectiveness of programs that promote energy saving behavior, but at the same time creates room for raising the minimum of renewable sources without unduly depressing production and consumption.

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  • Zhou, Huizhong & Tamas, Meszaros Matyas, 2010. "Impacts of integration of production of black and green energy," Energy Economics, Elsevier, vol. 32(1), pages 220-226, January.
    • Handle: RePEc:eee:eneeco:v:32:y:2010:i:1:p:220-226
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    References listed on IDEAS

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    Cited by:

    1. Shrestha, Anil & Kakinaka, Makoto, 2023. "Nexus between renewable energy certificates and electricity prices in India: Evidence from wavelet coherence analysis," Renewable Energy, Elsevier, vol. 204(C), pages 836-847.
    2. Kevin Currier & Yanming Sun, 2014. "Market Power and Welfare in Electricity Markets Employing Tradable Green Certificate Systems," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 20(2), pages 129-138, May.
    3. Till Requate, 2015. "Green tradable certificates versus feed-in tariffs in the promotion of renewable energy shares," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(2), pages 211-239, April.
    4. Fang, Debin & Zhao, Chaoyang & Kleit, Andrew N., 2019. "The impact of the under enforcement of RPS in China: An evolutionary approach," Energy Policy, Elsevier, vol. 135(C).
    5. Karakosta, Ourania & Petropoulou, Dimitra, 2022. "The EU electricity market: Renewables targets, Tradable Green Certificates and electricity trade," Energy Economics, Elsevier, vol. 111(C).
    6. Narita, Daiju & Requate, Till, 2021. "Price vs. quantity regulation of volatile energy supply and market entry of RES-E operators," Energy Economics, Elsevier, vol. 101(C).
    7. Irfan, Mohd, 2021. "Integration between electricity and renewable energy certificate (REC) markets: Factors influencing the solar and non-solar REC in India," Renewable Energy, Elsevier, vol. 179(C), pages 65-74.
    8. Tamás, Mészáros Mátyás & Bade Shrestha, S.O. & Zhou, Huizhong, 2010. "Feed-in tariff and tradable green certificate in oligopoly," Energy Policy, Elsevier, vol. 38(8), pages 4040-4047, August.
    9. Currier, Kevin M., 2013. "A regulatory adjustment process for the determination of the optimal percentage requirement in an electricity market with Tradable Green Certificates," Energy Policy, Elsevier, vol. 62(C), pages 1053-1057.

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