Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81388
Authors: 
Fridolfsson, Sven-Olof
Tangerås, Thomas
Year of Publication: 
2011
Series/Report no.: 
IFN Working Paper 892
Abstract: 
We propose nuclear capacity auctions as a means to improve the incentives for investing in nuclear power. A properly designed auction would (i) allocate the license to the most efficient bidder; (ii) sell the license if and only if new nuclear power was socially optimal. In particular, capacity auctions open the market for large-scale entry by outside firms. Requiring licensees to sell a share of capacity as virtual power plant contracts increases auction efficiency by softening incumbent producers’ incentive to bid for market power. Our motivating example is Sweden’s recent decision to allow new nuclear power to replace old reactors.
Subjects: 
Capacity auctions
investments
market power
nuclear power
virtual power plants
JEL: 
D44
L12
Q48
Document Type: 
Working Paper

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