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Strategic investment in electricity generation with renewable entrants: The case of French nuclear power

Author

Listed:
  • Abdel Mokhtari

    (emlyon business school, 144 avenue Jean Jaurès, 69007, Lyon, France)

  • Richard Ruble

    (emlyon business school, CNRS, Université Lumière Lyon 2, Université Jean Monnet Saint-Etienne, GATE, 69007, Lyon, France)

Abstract

We study incentives to invest in electricity generation capacity if an incumbent using nuclear power competes with an endogenous number of entrants using intermittent renewable energy sources. The intermittence of renewables makes the incumbent less aggressive, and the incumbent accommodates if the efficiency difference between technologies is not too large. We analyze France’s long-running subsidy scheme, the ARENH, through the prism of our model. This policy achieves its aim of making product market outcomes more competitive through an endogenous entry channel, but if investments in nuclear power are restarted then pursuing such a scheme would run the risk of facilitating deterrence.

Suggested Citation

  • Abdel Mokhtari & Richard Ruble, 2024. "Strategic investment in electricity generation with renewable entrants: The case of French nuclear power," Working Papers 2422, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:2422
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    References listed on IDEAS

    as
    1. Ambec, Stefan & Crampes, Claude, 2012. "Electricity provision with intermittent sources of energy," Resource and Energy Economics, Elsevier, vol. 34(3), pages 319-336.
    2. repec:dau:papers:123456789/12068 is not listed on IDEAS
    3. Ambec, Stefan & Crampes, Claude, 2021. "Real-time electricity pricing to balance green energy intermittency," Energy Economics, Elsevier, vol. 94(C).
    4. Daron Acemoglu & Ali Kakhbod & Asuman Ozdaglar, 2017. "Competition in Electricity Markets with Renewable Energy Sources," The Energy Journal, , vol. 38(1_suppl), pages 137-156, June.
    5. Fabra, Natalia, 2021. "The energy transition: An industrial economics perspective," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    6. Natalia Fabra & Gerard Llobet, 2023. "Auctions with Privately Known Capacities: Understanding Competition Among Renewables," The Economic Journal, Royal Economic Society, vol. 133(651), pages 1106-1146.
    7. Cany, C. & Mansilla, C. & Mathonnière, G. & da Costa, P., 2018. "Nuclear power supply: Going against the misconceptions. Evidence of nuclear flexibility from the French experience," Energy, Elsevier, vol. 151(C), pages 289-296.
    8. Hiroaki Ino & Toshihiro Matsumura, 2010. "What role should public enterprises play in free-entry markets?," Journal of Economics, Springer, vol. 101(3), pages 213-230, November.
    9. Crampes, Claude & Glachant, Jean-Michel & von Hirschhhausen, Christian & Lévêque, François & Newbery, David & Perez-Arriaga, Ignacio & Ranci, Pippo & Stoft, Steve & Wilems, Bert, 2010. "Where the Champsaur Commission Has Got It Wrong," The Electricity Journal, Elsevier, vol. 22(7), pages 81-86, August.
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    11. Crampes, C. & Glachant, J.M. & von Hirschhausen, C. & Leveque, F. & Newberry, D. & Perez-Arriaga, I. & Ranci, P. & Soft, S. & Willems, Bert, 2009. "Where the Champsaur Commission has got it wrong (Guest editorial)," Other publications TiSEM 2b2af602-6758-4b85-8398-7, Tilburg University, School of Economics and Management.
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    More about this item

    Keywords

    Free entry; Intermittence; Renewable energy; Stackelberg leadership;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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