We study the impact of price cap regulation on the level and timing of investment in an oligopolistic (Cournot) industry facing stochastic demand. We find that a price ceiling affects investment decisions in two mutually competing ways: it makes the option to defer investment more valuable, but...

New entrants in liberalized electricity markets which are not vertically integrated and do not operate a large and diversified portfolio of generation technologies are likely to favour technologies which offer the best prospects to manage fuel and electricity price risks through contractual...

This paper argues that electricity market reform - particularly the need for complementary mechanisms to remunerate capacity - need to be analysed in the light of the local regulatory and institutional environment. If there is a lack of investment, the priority should be to identify the roots of...

There is no academic consensus on which electricity market design provides the least distorting investment incentives. Theory suggests that "energy-only markets" can allow capacity cost recovery by generators. However, separate payments for capacity or reserve obligations do not need to rely on...