In this section, you can access to the latest technical information related to the FUTURE project topic.

Horizontal subcontracting and investment in idle dispatchable power plants

We analyze horizontal subcontracting and show how idle production facilities can reduce contracting costs by credibly protecting against hold-up. Our analysis contributes to understanding competition between power firms that increasingly use intermittent generation sources. Their unilateral incentives to invest in maintaining underused units, such as dispatchable gas-fired plants, are underrated by plant profitability indicators. From a policy perspective, decentralized strategic investment incentives reduce the possible need for centralized security of supply measures. Our welfare analysis indicates that quantity competition can lead to a lower market-clearing price than price competition.

» Author: Frank Winde, Doug Brugge, Andreas Nidecker, Urs Ruegg

» Reference: International Journal of Industrial Organization, Volume 52

» Source: ScienceDirect - GPP

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