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Market power in the Spanish electricity auction

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Abstract

Hourly data from the Spanish day-ahead electricity auction is used to obtain a lower bound measure of generators’ market power. Our method is not based on cost estimates but rather on the behavioral differences between strategic generators and more competitive producers. The results indicate that, despite the price cap effect of regulation in this market, the larger operators in the day-ahead market are able to increase significantly prices above the competitive benchmark. We also show that the two large generators do not exploit the full potential of their market power.

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Authors and Affiliations

  1. Departamento de Fundamentos del Análisis Económico II, Universidad del País Vasco, Avenida Lehendakari Aguirre 83, 48015, Bilbao, Spain

    Aitor Ciarreta & María Paz Espinosa

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  1. Aitor Ciarreta
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  2. María Paz Espinosa
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Correspondence to María Paz Espinosa.

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Regulated by Act 2019 of December 26, 1997.

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Ciarreta, A., Espinosa, M.P. Market power in the Spanish electricity auction. J Regul Econ 37, 42–69 (2010). https://doi.org/10.1007/s11149-009-9102-7

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