The unbundling of formerly vertically integrated utilities in liberalized electricity markets led to a coordination problem between investments in the regulated electricity grid and investments into new power generation. At the same time investments into new generation capacities based on...

Liberalization of network industries frequently separates the network from the other parts of the industry. This is important in particular for the electricity industry where private firms invest into generation facilities, while network investments usually are controlled by regulators. We...

The informationally simple approach to incentive regulation applies mechanisms that translate the regulator’s objective function into the firm’s profit-maximizing objective. These mechanisms come in two forms, one based on subsidies/taxes,the other based on constraints/ price caps. In spite...

This paper presents an application of a mechanism that provides incentives to promote transmission network expansion in the area of the US electric system known as PJM. The applied mechanism combines the merchant and regulatory approaches to attract investment into transmission grids. It is...

The informationally simple approach to incentive regulation applies mechanisms that translate the regulator's objective function into the firm's profit-maximizing objective. These mechanisms come in two forms, one based on subsidies/taxes, the other based on constraints/price caps. In spite of a...

Legal challenges and transitions of political power cause the future of regulatory policies to be uncertain. In this article, I investigate how uncertainty about environmental policy affects investment and emissions at coal-fired power plants. I exploit a legal challenge to the Clean Air...

This research presents an application of the Hogan, Rosellón and Vogelsang (2010) (HRV) mechanism to promote electricity transmission network expansion in the Peruvian electricity transmission system known as SEIN (Sistema Eléctrico Interconectado Nacional). The HRV mechanism combines the...

Given the characteristics of electricity and the reforms that this sector has undergone, there is still a lot of discussion regarding the best way of ensuring adequate supply in such an environment. The situation is even more critical for countries like Colombia with high dependence on hydro...

The reduced attractiveness of investments in reliable power plants under conditions of liberalized markets and the transition towards renewable energies has brought a discussion on capacity policies to Europe. We use a partial equilibrium model to compare important effects of three basic...

In a Vickrey auction, if one bidder can invest to increase his value, the combined mechanism including investments is still fully optimal. By contrast, for any β 1, there exist monotone allocation rules that guarantee a fraction β of the allocative optimum in the worst case, but such that the...