A Look Upstream: Electricity Market Restructuring, Risk, Procurement Contracts and Efficiency

Di Maria, Corrado, Lange, Ian A. and Lazarova, Emiliya (2014) A Look Upstream: Electricity Market Restructuring, Risk, Procurement Contracts and Efficiency.

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This paper analyzes theoretically and empirically how upstream markets are affected by deregulation downstream. Deregulation tends to increase the level of uncertainty in the upstream market. Our theoretical analysis predicts that deregulated firms respond to this increase in uncertainty by writing more rigid contracts with their suppliers. Using the restructuring of the electricity market in the U.S. as our case study, we find support for our theoretical predictions. Furthermore, we investigate the impact this change in procurement contracts has on efficiency. Focusing on coal mines, we find that those selling coal to plants in restructured markets are significantly more productive than their counterparts working with regulated plants. On the other hand, we also find that transaction costs may have increased as a consequence of deregulation.

Item Type: Article
Uncontrolled Keywords: energy policy,electricity market restructuring,deregulation,procurement contracts,risk,efficiency,sdg 7 - affordable and clean energy ,/dk/atira/pure/sustainabledevelopmentgoals/affordable_and_clean_energy
Faculty \ School: Faculty of Social Sciences > School of Economics
University of East Anglia > Faculty of Science > Research Centres > Tyndall Centre for Climate Change Research
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Depositing User: Pure Connector
Date Deposited: 31 Oct 2016 17:00
Last Modified: 20 Apr 2022 00:27
URI: https://ueaeprints.uea.ac.uk/id/eprint/61189

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