Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Saturday, November 24, 2007

Vertical Separation v. Independent Downstream Entry in the Spanish Electricity Network: An Experimental Approach

Posted by D. Daniel Sokol

With the winter freeze soon approaching, it is time to consider how to create a more efficient electric sector. In their paper Vertical Separation v. Independent Downstream Entry in the Spanish Electricity Network: An Experimental Approach, Aitor Ciarreta (Universidad del País Vasco), Enrique Fatas (University of Valencia), Nikolaos Georgantzís (University Jaume I of Castellon) and Carlos Gutierrez-Hita (University Miguel Hernández) undertake some interesting modeling work to arrive at a more efficient market design.

ABSTRACT: We present experimental results from a series of sessions organized using the Power Market simulator; a software designed to realistically replicate the Spanish Electricity Market. In the experiments reported here we compare the status quo to two alternative treatments which represent alternative market structures. In one of them, labeled as vertical separation, we assume that power generating firms and electricity distributors-end suppliers belong to separate business groups. In the second, we study the effect of entry by independent end-suppliers. Both alternative scenarios dominate the status quo in terms of market efficiency, whereas the latter of them dominates the former.

http://lawprofessors.typepad.com/antitrustprof_blog/2007/11/vertical-separa.html

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