IDEAS home Printed from https://ideas.repec.org/p/bei/00bewp/0006.html
   My bibliography  Save this paper

Vertical Economies and the Costs of Separating Electricity Supply-A Review of Theoretical and Empirical Literature

Author

Listed:
  • Roland Meyer

Abstract

Motivated by the European movement towards a separation of electricity networks from the competitive functions generation and supply this paper reviews theoretical and empirical literature on vertical synergies in electricity supply. In the analysis a clear distinction is made between four different unbundling options leading to different forms and magnitudes of synergy losses. Apart from coordination economies a main source of scope economies seems to result from a market risk effect if generation and retail are separated. Accordingly, the European policy of network unbundling (either transmission or distribution) results in synergy losses between 2 and 5 percent due to coordination losses, while an unbundling option that includes a separation between retail and generation, as observed in some U.S. states, may lead to a permanent cost increase of 15 percent and more due to a significant risk increase.

Suggested Citation

  • Roland Meyer, 2011. "Vertical Economies and the Costs of Separating Electricity Supply-A Review of Theoretical and Empirical Literature," Bremen Energy Working Papers 0006, Bremen Energy Research.
    • Handle: RePEc:bei:00bewp:0006
    as

    Download full text from publisher

    File URL: http://web.b.ebscohost.com/ehost/detail?sid=0300432c-0b38-411e-93d6-d106b78c53fe%40sessionmgr113&vid=1&hid=112&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=aph&AN=82315890
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. de Nooij, Michiel & Baarsma, Barbara, 2009. "Divorce comes at a price: An ex ante welfare analysis of ownership unbundling of the distribution and commercial companies in the Dutch energy sector," Energy Policy, Elsevier, vol. 37(12), pages 5449-5458, December.
    2. repec:bla:jindec:v:49:y:2001:i:3:p:319-33 is not listed on IDEAS
    3. T. Randolph Beard & David L. Kaserman & John W. Mayo, 2001. "Regulation, Vertical Integration and Sabotage," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 319-333, September.
    4. Jara-Diaz, Sergio & Ramos-Real, Francisco Javier & Martinez-Budria, Eduardo, 2004. "Economies of integration in the Spanish electricity industry using a multistage cost function," Energy Economics, Elsevier, vol. 26(6), pages 995-1013, November.
    5. Growitsch, Christian & Müller, Gernot & Stronzik, Marcus, 2008. "Ownership Unbundling in der Gaswirtschaft: Theoretische Grundlagen und empirische Evidenz," WIK Discussion Papers 308, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    6. Machiel Mulder & Victoria Shestalova & Mark Lijesen, 2005. "Vertical separation of the energy-distribution industry; an assessment of several options for unbundling," CPB Document 84, CPB Netherlands Bureau for Economic Policy Analysis.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Erik Lundin, 2020. "Effects of Privatization on Price and Labor Efficiency: The Swedish Electricity Distribution Sector," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 247-274.
    2. Paul Nillesen and Michael Pollitt, 2021. "Ownership Unbundling of Electricity Distribution Networks," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    3. Roland Meyer, 2012. "Economies of scope in electricity supply and the costs of vertical separation for different unbundling scenarios," Journal of Regulatory Economics, Springer, vol. 42(1), pages 95-114, August.
    4. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Reforming small electricity systems under political instability: The case of Nepal," Energy Policy, Elsevier, vol. 40(C), pages 242-251.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roland Meyer, 2012. "Vertical Economies and the Costs of Separating Electricity Supply--A Review of Theoretical and Empirical Literature," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    2. Tsatsos, Aristidis, 2012. "Die Liberalisierung des russischen Gassektors: 3 Szenarios? [The liberalisation of the Russian gas sector: 3 scenarios?]," MPRA Paper 44623, University Library of Munich, Germany.
    3. Paul Nillesen and Michael Pollitt, 2021. "Ownership Unbundling of Electricity Distribution Networks," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    4. Buchmann, Marius, 2017. "Governance of data and information management in smart distribution grids: Increase efficiency by balancing coordination and competition," Utilities Policy, Elsevier, vol. 44(C), pages 63-72.
    5. Brunekreeft, Gert, 2015. "Network unbundling and flawed coordination: Experience from the electricity sector," Utilities Policy, Elsevier, vol. 34(C), pages 11-18.
    6. Marius Buchmann, 2016. "Information Management in Smart Grids - Who Should Govern Information Management to Balance Between Coordination and Competition on the Distribution Grid Level?," Bremen Energy Working Papers 0022, Bremen Energy Research.
    7. Allain, Marie-Laure & Chambolle, Claire & Rey, Patrick & Teyssier, Sabrina, 2021. "Vertical integration as a source of hold-up: An experiment," European Economic Review, Elsevier, vol. 137(C).
    8. Fetz, Aurelio & Filippini, Massimo, 2010. "Economies of vertical integration in the Swiss electricity sector," Energy Economics, Elsevier, vol. 32(6), pages 1325-1330, November.
    9. Felix Höffler & Sebastian Kranz, 2011. "Imperfect legal unbundling of monopolistic bottlenecks," Journal of Regulatory Economics, Springer, vol. 39(3), pages 273-292, June.
    10. Brennan, Timothy J., 2011. "Energy Efficiency Policy: Surveying the Puzzles," RFF Working Paper Series dp-11-27, Resources for the Future.
    11. Toshihiro Matsumura & Noriaki Matsushima, 2009. "Access Charge, Vertical Separation, and Lobbying," Discussion Papers 2009-11, Kobe University, Graduate School of Business Administration.
    12. Simshauser, P., 2020. "Merchant utilities and boundaries of the firm: vertical integration in energy-only markets," Cambridge Working Papers in Economics 2039, Faculty of Economics, University of Cambridge.
    13. P.W.J. De Bijl, 2005. "Structural Separation and Access in Telecommunications Markets," Competition and Regulation in Network Industries, Intersentia, vol. 6(2), pages 95-115, June.
    14. Bauer, Johannes M. & Bohlin, Erik, 2022. "Regulation and innovation in 5G markets," Telecommunications Policy, Elsevier, vol. 46(4).
    15. Nikogosian, Vigen & Veith, Tobias, 2011. "Vertical integration, separation and non-price discrimination: An empirical analysis of German electricity markets for residential customers," ZEW Discussion Papers 11-069, ZEW - Leibniz Centre for European Economic Research.
    16. Angenendt, Nicole & Schäffner, Daniel, 2005. "Regulierungsökonomische Aspekte des Unbundling bei Versorgungsunternehmen unter besonderer Berücksichtigung von Pacht- und Dienstleistungsmodellen," WIK Discussion Papers 270, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    17. Ricardo GONCALVES & Álvaro NASCIMENTO, 2013. "Next Generation Access Networks: The Post-Investment Conundrum," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(92), pages 91-112, 4th quart.
    18. Sappington, David E.M., 2006. "On the design of input prices: Can TELRIC prices ever be optimal?," Information Economics and Policy, Elsevier, vol. 18(2), pages 197-215, June.
    19. Richard Cadman, 2016. "Three forms of BT Separation: Objectives, solutions and effects," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2016-10, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    20. Höffler, Felix & Kranz, Sebastian, 2011. "Legal unbundling can be a golden mean between vertical integration and ownership separation," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 576-588, September.

    More about this item

    Keywords

    ownership unbundling; vertical integration; economies of scope;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bei:00bewp:0006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anna Pechan (email available below). General contact details of provider: http://bremen-energy-research.de/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.