Economies of scope in electricity supply and the costs of vertical separation for different unbundling scenarios

Meyer, Roland
August 2012
Journal of Regulatory Economics;Aug2012, Vol. 42 Issue 1, p95
Academic Journal
Motivated by the movement towards vertical unbundling in Europe this study measures the economies of scope for the U.S. electricity industry based on a multi-stage cost function. The paper analyzes three unbundling options and finds evidence for synergies that may be explained by coordination and risk effects. Separating generation from networks and retail appears to be the most costly alternative with an average cost increase of 19 to 26%. If generation and transmission remain integrated but are separated from distribution and retail, average scope economies amount to 8 to 10%. A split between the transmission level and the remaining supply stages leads to a cost increase of approximately 4%.


Related Articles

  • Vertical economics: The case of U.S. electric utility industry, 1983-87. Hayashi, Paul M.; Goo, James Yeoung-Ji // Southern Economic Journal;Jan97, Vol. 63 Issue 3, p710 

    Examines the impact of vertical integration on the cost of supplying electricity. Information on the argument in favor of public utilities operating as monopolies; Details on literature on economies of scale and vertical integration in the electric utility industry.

  • Plans put forward for streamlined supply and distribution.  // Horticulture Week;11/5/2010, p5 

    The article reports on the solutions for streamlined supply and distribution between growers and retailers in Great Britain.

  • The effect of output specification on the optimal policy design for electric utilities. Jara-D�az, Sergio; Ramos-Real, Francisco // Journal of Regulatory Economics;Aug2011, Vol. 40 Issue 1, p62 

    We show that the manner in which the production process is seen when analyzing data on electricity production has an impact on the policy conclusions. In particular, we show that the different specifications of output found in the literature can generate quite diverse views regarding regulation...

  • Significant industry escalates PL chase.  // WWD: Women's Wear Daily;11/1/1995, Vol. 170 Issue 82, WWDInfotracs p6 

    Discusses the role that brands and private labels (PL) that are intended to become brands in the vertical integration of the United States retail industry. Factors contributing to growth declines of the industry; Increase in PL share and decline in brand share; Growth in market share of...

  • Here come the majors: oil breaks into electric market. Keenan, Gerald M. // Electric Light & Power;Nov2000, Vol. 78 Issue 11, p4 

    Focuses on the participation of energy companies in the electric power industry in the United States. Impact of the retail market opening on active participation; Reasons behind the entry of major energy companies in the electricity industry; Importance of vertical integration in increasing oil...

  • Utilities won't give up profitable networks without a fight.  // MarketWatch: Global Round-up;Nov2007, Vol. 6 Issue 11, p160 

    The article reports on the impact of the European Union's (EU) Third Energy Package designed to separate network transmission systems from retail supply systems on some vertically integrated energy utilities. It states that the EU's reforms have a minimal effect on some vertically integrated...

  • Electricity Market Restructuring and Energy Contracts: A Critical Note on the EU Commission’s NEA Decision. Onofri, Laura // European Journal of Law & Economics;Jul2005, Vol. 20 Issue 1, p71 

    As highlighted in the economic literature, contracts are crucial policy instruments to organize and manage restructured electricity markets. In the early 90’s, during the restructuring of the electricity market in UK, the three main Scottish electricity generators stipulated a long-term,...

  • Legal unbundling and auctions in vertically integrated (utilities) markets. van Koten, Silvester // European Journal of Law & Economics;Dec2013, Vol. 36 Issue 3, p543 

    This paper addresses the effectiveness of auctions and legal unbundling as regulatory measures to tender a vertically integrated industry more competitive. Specifically, I analyze if implementing auctions and legal unbundling can counter market power in an industry where a Vertically Integrated...

  • What do public want from RDR? Lakey, Alan // Money Marketing;1/7/2010, p13 

    In this article the author discusses aspects of the retail distribution review (RDR) and what the consumers actually want from RDR in Great Britain. An overview on the proposed outcomes given by the author to his clients about the RDR process is also offered. The author suggests that there is...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics