The Elmar model: output and capacity in imperfectly competitive electricity markets

With the ongoing liberalization and integration of European energy markets and the increasing worries about security of supply, the need for thorough economic analysis of electricity markets is growing. Elmar is a model for the European electricity market, taking into account imperfect competition through conjectural variations, as well as imperfect international competition due to import capacity restrictions. The model distinguishes between competition on the output market and competition in capacity investments. We find that the least competitive of these determines wholesale prices.