Dokument

Summary:
This paper develops a theoretical model to highlight the bearing of market structures on retail price effects of a sfgFIT induced market entrance from green electricity. Moving from perfect competition via Bertrand and Cournot oligopoly to monopoly, we find that retail electricity prices are more likely to decline, when market concentration as measured by the HHI (from perceived market shares) is larger. In the extreme cases, the price effect is unequivocally negative (monopoly) or positive (perfect competition). One should note, that this result only holds for a given market structure. When firms leave the market, market concentration increases and so do electricity retail prices. When running the full gamut from perfect competition to monopoly by increasing the sfgFIT and thus successively driving firms out of the market the total price effect will be positive: perfect competitors produce at the average cost minimum and the monopolist sells at a price above average costs, which have been increased by the additional costs of green energy. We also show that in Cournot oligopoly and in monopoly markets, a required proportional quota of green energy in electricity production induces larger prices than the sfgFIT system with the same induced total amount of green electricity.

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