Monday, August 29, 2016
Machiel Mulder, University of Groningen - Faculty of Economics and Business and Bert Willems, Tilburg University - Department of Economics - CentER & TILEC offer Competition in Retail Electricity Markets: An Assessment of Ten Year Dutch Experience.
ABSTRACT: This paper examines a decade of retail competition in the Dutch electricity market and discusses market structure, regulation, and market performance. We find a proliferation of product variety, in particular by the introduction of quality-differentiated green-energy products. Product innovation could be a sign of a well-functioning market that caters to customer’s preferences, but it can also indicate a strategic product differentiation to soften price competition. Although slightly downward trending, gross retail margins remain relatively high, especially for green products. Price dispersion across retailers for identical products remains high, as also across products for a single retailer. We do not find evidence of asymmetric pass-through of wholesale costs. Overall, the retail market matured as evidenced by fewer consumer complaints and higher switching rates. A fairly intensive regulation of mature energy retail markets appears to be needed to create benefits for consumers.