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Journal Article

Competition in the British Electricity Spot Market

Richard J. Green and David M. Newbery
Journal of Political Economy
Vol. 100, No. 5 (Oct., 1992), pp. 929-953
Stable URL: http://www.jstor.org/stable/2138629
Page Count: 25
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Competition in the British Electricity Spot Market
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Abstract

Most of the British electricity supply industry has been privatized. Two dominant generators supply bulk electricity to an unregulated "pool." They submit a supply schedule of prices for generation and receive the market-clearing price, which varies with demand. Despite claims that this should be highly competitive, we show that the Nash equilibrium in supply schedules implies a high markup on marginal cost and substantial deadweight losses. Further simulations, to show the effect of entry by 1994, produce somewhat lower prices, at the cost of excessive entry; subdividing the generators into five firms would produce better results.

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