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Vertical integration and market power: A model based analysis of restructuring in the Korean electricity market

Journal

Energy Policy

Subject

Management Science and Operations

Publishing details

Energy Policy 2010 July Vol 38:7 p 3710-3716

Authors / Editors

Bunn D W;Ochoa P;Martoccia M;Kim H;Sahn N

Biographies

Derek Bunn

Publication Year

2010

Abstract

An agent-based simulation model is developed using computational learning to investigate the impact of vertical integration between electricity generators and retailers on market power in a competitive wholesale market setting. It is observed that if partial vertical integration creates some market foreclosure, whether this leads to an increase or decrease in market power is situation specific. A detailed application to the Korean market structure reveals this to be the case. We find that in various cases, whilst vertical integration generally reduces spot prices, it can increase or decrease the market power of other market generators, depending upon the market share and the technology segment of the market, which is integrated, as well as the market concentrations before and after the integration.

Keywords

Electricity; Vertical integration; Agent-based simulation

Available on ECCH

No


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