Title: The potential impact of cross-ownership in transmission: An application to the Belgian electricity market
Authors: Pepermans, Guido
Willems, Bert
Issue Date: 2005
Publisher: KU Leuven CES
Series Title: Working Papers vol: ETE WP 2005-1 pages:1-34
Abstract: This paper looks at the potential effect of partial ownership on the generation and the transmission sector of electricity markets. Ideally, in liberalized electricity markets, transmission is separated form generation. The transmission sector is a natural monopoly operated by a regulated transmission firm, while the generation sector is open for competition. This paper assumes that the transmission firm is not very well regulated and behaves strategically, that there is oligoplistic competition in generation, and that one of the generators, the incumbent, owns part of the transmission firm. We then study the effect
of this partial ownership in a numerical model which is calibrated on the Belgian market. The model captures two kinds of partial ownership interactions: passive ownership, where the generation firm simply cashes its share of the transmission firm’s profit without having a direct impact on its decision process, and active ownership, where the generator has a direct influence on the transmission firm’s
decision process. It is shown that ownership of the network operator by the incumbent generator reduces double marginalization (= welfare improving) but also reduces entry in the generation market (= welfare decreasing).
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center of Energy, Transport and Environment, Leuven
Faculty of Economics and Business (FEB) - miscellaneous
Research Centre for Economics and Corporate Sustainability, Campus Brussels

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