NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Imperfect Markets versus Imperfect Regulation in U.S. Electricity Generation

Steve Cicala

NBER Working Paper No. 23053
Issued in January 2017
NBER Program(s):Environment and Energy Economics, Industrial Organization

This paper measures changes in electricity generation costs caused by the introduction of market mechanisms to determine output decisions in service areas that were previously using command-and-control-type operations. I use the staggered transition to markets from 1999- 2012 to evaluate the causal impact of liberalization using a nationwide panel of hourly data on electricity demand and unit-level costs, capacities, and output. To address the potentially confounding effects of unrelated fuel price changes, I use machine learning methods to predict the allocation of output to generating units in the absence of markets for counterfactual production patterns. I find that markets reduce production costs by $3B per year by reallocating output among existing power plants: Gains from trade across service areas increase by 20% based on a 10% increase in traded electricity, and costs from using uneconomical units fall 20% from a 10% reduction in their operation.

download in pdf format
   (1839 K)

email paper

A non-technical summary of this paper is available in the April 2017 NBER digest.  You can sign up to receive the NBER Digest by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23053

Users who downloaded this paper also downloaded* these:
Fryer w22399 An Empirical Analysis of Racial Differences in Police Use of Force
Ryan w23106 The Competitive Effects of Transmission Infrastructure in the Indian Electricity Market
Borenstein and Bushnell w21113 The U.S. Electricity Industry After 20 Years of Restructuring
Burlig, Knittel, Rapson, Reguant, and Wolfram w23908 Machine Learning from Schools about Energy Efficiency
Kellogg w23024 Gasoline Price Uncertainty and the Design of Fuel Economy Standards
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us