IDEAS home Printed from https://ideas.repec.org/p/enp/wpaper/eprg1930.html
   My bibliography  Save this paper

Assessing Market Power in the Italian Electricity Market: A synthetic supply approach

Author

Listed:
  • Francesco Rossetto

    (Department of Economics, University of Verona)

  • Luigi Grossi

    (Department of Economics, University of Verona)

  • Michael Pollitt

    (EPRG, CJBS, University of Cambridge)

Abstract

The aim of this article is to investigate the effects of the bidding strategies of leading firms on market equilibria. The analysis focuses on the Italian wholesale electricity market from 2015 to 2018. The purpose is to assess if the observed market equilibria are the results of a competitive setting or if more competitive equilibria could have occurred. We use the methodology of synthetic supply proposed by Ciarreta et al. (2010a). This way, a new set of synthetic prices and quantities is computed. The comparison between the actual and synthetic prices allows us to assess the effects of market power on the actual equilibria. Results suggest that whilst there is a significant impact on prices, quantities seem not to be affected, due to the inelastic demand. Moreover, our findings suggest that the main impacts occurred during 2017 especially during those months where above average heating and cooling were required.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Francesco Rossetto & Luigi Grossi & Michael Pollitt, 2019. "Assessing Market Power in the Italian Electricity Market: A synthetic supply approach," Working Papers EPRG1930, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1930
    as

    Download full text from publisher

    File URL: https://www.jbs.cam.ac.uk/wp-content/uploads/2023/12/eprg-wp1930.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bosco, Bruno & Parisio, Lucia & Pelagatti, Matteo, 2013. "Price-capping in partially monopolistic electricity markets with an application to Italy," Energy Policy, Elsevier, vol. 54(C), pages 257-266.
    2. Aitor Ciarreta & María Espinosa, 2010. "Market power in the Spanish electricity auction," Journal of Regulatory Economics, Springer, vol. 37(1), pages 42-69, February.
    3. Ciarreta, Aitor & Espinosa, Maria Paz & Pizarro-Irizar, Cristina, 2017. "Has renewable energy induced competitive behavior in the Spanish electricity market?," Energy Policy, Elsevier, vol. 104(C), pages 171-182.
    4. Simona Bigerna, Carlo Andrea Bollino and Paolo Polinori, 2016. "Renewable Energy and Market Power in the Italian Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Bollino-M).
    5. Andrew Sweeting, 2007. "Market Power In The England And Wales Wholesale Electricity Market 1995-2000," Economic Journal, Royal Economic Society, vol. 117(520), pages 654-685, April.
    6. Aitor Ciarreta & Maria Paz Espinosa, 2010. "Supply Function Competition in the Spanish Wholesale Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 137-158.
    7. Bosco, Bruno & Parisio, Lucia & Pelagatti, Matteo, 2012. "Strategic bidding in vertically integrated power markets with an application to the Italian electricity auctions," Energy Economics, Elsevier, vol. 34(6), pages 2046-2057.
    8. Genc, Talat S., 2016. "Measuring demand responses to wholesale electricity prices using market power indices," Energy Economics, Elsevier, vol. 56(C), pages 247-260.
    9. Frank A. Wolak, 2003. "Measuring Unilateral Market Power in Wholesale Electricity Markets: The California Market, 1998–2000," American Economic Review, American Economic Association, vol. 93(2), pages 425-430, May.
    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. Savelli, Iacopo & Morstyn, Thomas, 2021. "Electricity prices and tariffs to keep everyone happy: A framework for fixed and nodal prices coexistence in distribution grids with optimal tariffs for investment cost recovery," Omega, Elsevier, vol. 103(C).
    2. Bigerna, Simona & Bollino, Carlo Andrea & D'Errico, Maria Chiara & Polinori, Paolo, 2022. "COVID-19 lockdown and market power in the Italian electricity market," Energy Policy, Elsevier, vol. 161(C).

    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. Arcos-Vargas, A. & Nuñez, F. & Román-Collado, R., 2020. "Short-term effects of PV integration on global welfare and CO2 emissions. An application to the Iberian electricity market," Energy, Elsevier, vol. 200(C).
    2. Bigerna, Simona & Andrea Bollino, Carlo & Polinori, Paolo, 2015. "Marginal cost and congestion in the Italian electricity market: An indirect estimation approach," Energy Policy, Elsevier, vol. 85(C), pages 445-454.
    3. Simona Bigerna & Carlo Andrea Bollino & Maria Chiara D’Errico & Paolo Polinori, 2023. "A new design for market power monitoring in the electricity market. A simulation for Italy," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 285-317, April.
    4. Ciarreta, Aitor & Espinosa, Maria Paz & Pizarro-Irizar, Cristina, 2017. "Has renewable energy induced competitive behavior in the Spanish electricity market?," Energy Policy, Elsevier, vol. 104(C), pages 171-182.
    5. Bigerna, Simona & Bollino, Carlo Andrea & D'Errico, Maria Chiara & Polinori, Paolo, 2015. "Competitive equilibrium in the italian wholesale electricity market," MPRA Paper 68310, University Library of Munich, Germany.
    6. Simona Bigerna, Carlo Andrea Bollino and Paolo Polinori, 2016. "Market Power and Transmission Congestion in the Italian Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    7. Maria Chiara D?Errico, 2020. "Competition in the Italian electricity market: The unforeseen social welfare losses of reform," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2020(2), pages 75-91.
    8. Bruno Bosco, Lucia Parisio and Matteo Pelagatti, 2016. "Price coordination in vertically integrated electricity markets. Theory and empirical evidence," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    9. Bigerna, Simona & Bollino, Carlo Andrea & Ciferri, Davide & Polinori, Paolo, 2017. "Renewables diffusion and contagion effect in Italian regional electricity markets: Assessment and policy implications," Renewable and Sustainable Energy Reviews, Elsevier, vol. 68(P1), pages 199-211.
    10. Moutinho, Victor & Moreira, António C. & Mota, Jorge, 2014. "Do regulatory mechanisms promote competition and mitigate market power? Evidence from Spanish electricity market," Energy Policy, Elsevier, vol. 68(C), pages 403-412.
    11. Ciarreta, Aitor & Espinosa, María Paz, 2012. "The impact of regulation on pricing behavior in the Spanish electricity market (2002–2005)," Energy Economics, Elsevier, vol. 34(6), pages 2039-2045.
    12. Brown, David P. & Eckert, Andrew, 2021. "Analyzing firm behavior in restructured electricity markets: Empirical challenges with a residual demand analysis," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    13. Peña, Juan Ignacio, 2024. "A note on hydropower as a marginal price setter for Spain's electricity market in 2021–2022," Utilities Policy, Elsevier, vol. 87(C).
    14. David P. Brown & Andrew Eckert, 2022. "Pricing Patterns in Wholesale Electricity Markets: Unilateral Market Power or Coordinated Behavior?," Journal of Industrial Economics, Wiley Blackwell, vol. 70(1), pages 168-216, March.
    15. Paul Klemperer, 2007. "Bidding Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 3(1), pages 1-47.
    16. David P. Brown & Derek E. H. Olmstead, 2017. "Measuring market power and the efficiency of Alberta's restructured electricity market: An energy-only market design," Canadian Journal of Economics, Canadian Economics Association, vol. 50(3), pages 838-870, August.
    17. Bigerna, Simona & Bollino, Carlo Andrea & D'Errico, Maria Chiara & Polinori, Paolo, 2022. "COVID-19 lockdown and market power in the Italian electricity market," Energy Policy, Elsevier, vol. 161(C).
    18. Carlos Suarez, 2021. "Mixed Oligopoly and Market Power Mitigation: Evidence from the Colombian Wholesale Electricity Market," IREA Working Papers 202101, University of Barcelona, Research Institute of Applied Economics, revised Jan 2021.
    19. Victor F. Moutinho & António C. Moreira & João Paulo C. Bento, 2018. "Strategic decisions on bilateral bidding behavior: evidence from a wholesale electricity market," Empirical Economics, Springer, vol. 54(3), pages 1353-1387, May.
    20. Munhoz, Fernando Colli, 2021. "Two-settlement system for the Brazilian electricity market," Energy Policy, Elsevier, vol. 152(C).

    More about this item

    Keywords

    Electricity Wholesale Market; Market Power; Bidding Strategy; Synthetic Supply;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

    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:enp:wpaper:eprg1930. 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: Ruth Newman (email available below). General contact details of provider: https://edirc.repec.org/data/jicamuk.html .

    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.