Market Power in Electricity Generation Sector: A Review of Methods and Applications

Aug 2017
Energy liberalization is commonly measured by the level of market competitiveness and price reductions. This review applies an alternative method, market power, to give a sense of firms’ pricing behaviors in the electricity generation market. In Both Guatemala and Chile, the ex post simulation approach suggests a slightly larger price markup ratio for firms with larger market share and more diversified generation technologies. Further, in Chile, the policy reform considering electrical supply bidding framework (Law No. 20.805) has been proved tentatively positive towards the mitigation of market power. With the hope of more data availability, this review also explores the possibilities to implement other measures of market power in LAC region as well as the data requirements for different methodologies.