Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/218978
Authors: 
Bohland, Moritz
Schwenen, Sebastian
Year of Publication: 
2020
Series/Report no.: 
DIW Discussion Papers No. 1856
Abstract: 
We show how policies to trigger clean technologies change price competition and market structure. We present evidence from electricity markets, where regulators have implemented different policies to subsidize clean energy. Building on a multi-unit auction model, we show that currently applied subsidy designs either foster or attenuate competition. Fixed, price-independent output subsidies decrease firms' mark-ups. In contrast, designs that subsidize clean output via a regulatory premium on the market price lead to higher mark-ups. We confirm this finding empirically using auction data from the Spanish power market. Our empirical results show that the design choice for technology subsidies significantly impacts pricing behavior of firms and policy costs for consumers.
Subjects: 
Subsidies
Clean Energy
Pricing
Electricity
JEL: 
D22
D44
D47
Document Type: 
Working Paper

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