Competition in the Dutch Electricity Market: An Empirical Analysis over 2006-2011

Abstract

We assess the development of competition in the Dutch electricity wholesale market over 2006-2011. In this period domestic generation capacity, both centralized and decentralized, as well as the cross-border transmission capacity increased. Using hourly plant-level data of centralized units and engineering-costs estimates, we estimate the weighted average Lerner index. During super peak hours, the annual average value of this index decreased from 0.23 in 2006 to 0.03 in 2011, indicating more competition. We find indications that the increase in competition can be attributed to the extension of cross-border connections, a higher price elasticity of net demand and more Bertrand-like competition. Enhancing the role of decentralized generation as well as fostering integration of markets seem to be effective measures to promote competition.

Keywords

Electricity market Competition Regulation Time-series analysis

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