Akshaya Jha is an Assistant Professor of Economics and Public Policy.
Institution: Heinz College of Information Systems and Public Policy, Carnegie Mellon University
“Start-up Costs and Market Power: Lessons from the Renewable Energy Transition”
Firms expect to recover the fixed costs required to start production by earning positive operating profits in subsequent periods. We develop a dynamic framework to calculate the series of prices and plant output allocations that minimize the production costs of serving electricity demand and allows for the recovery of the start-up costs incurred by fossil-fuel power plants. Using this framework, we show that static comparisons of observed market prices and marginal costs can overstate the rents attributable to market power in an electricity market where power plants frequently stop and start production in response to output from rooftop solar panels. We estimate that increases in solar capacity correspond to increases in the aggregate operating profits earned by fossil-fuel plants because competition softens at sunset – plants displaced by output from solar panels during the day must incur start-up costs to compete in the evening, reducing the number of plants operating in the evening and thus increasing firms’ ability to exercise market power.
Our Friday Lunch Meeting will take place from 12.30 pm – 2.00 pm
Due to the sanitary context, the registration to the seminar will be online only.
By Morgane Rahali Only available in French La transition énergétique impact les orientations économiques depuis plusieurs années. Elle représente l’ensemble des transformations sur un territoire donné qui ont pour but de diminuer l’impact environnemental. Le TURPE est un levier utilisé par la Commission de Régulation de l’Énergie pour favoriser la transition au travers de l’utilisation […]
By Christian de Perthuis This Policy Brief was initiated by a joint request from Confrontation Europe and the ID4D blog (Agence Française du Développement), which I would like to thank. It was written in complete independence and Its conclusions are solely those of the author. Setting the cap: tighter constraint needed! For 15 years, […]