The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile

We study the investment effects of market integration on renewable energy expansion. Our theory highlights that market integration not only improves allocative efficiency by gains from trade but also incentivizes new investment in renewable power plants. To test our theoretical predictions, we exami...

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Detalles Bibliográficos
Autores: Gonzales, Luis E., Ito, Koichiro, Reguant, Mar
Tipo de recurso: artículo
Fecha de publicación:2023
País:España
Institución:Consejo Superior de Investigaciones Científicas (CSIC)
Repositorio:DIGITAL.CSIC. Repositorio Institucional del CSIC
OAI Identifier:oai:dnet:digitalcsic_::d9646ebb99c6fdead89794e936a8dc71
Acceso en línea:http://hdl.handle.net/10261/354725
https://api.elsevier.com/content/abstract/scopus_id/85173766427
Access Level:acceso abierto
Palabra clave:Market integration
Renewable energy
Transmission expansion
Wholesale electricity markets
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spelling The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in ChileGonzales, Luis E.Ito, KoichiroReguant, MarMarket integrationRenewable energyTransmission expansionWholesale electricity marketsWe study the investment effects of market integration on renewable energy expansion. Our theory highlights that market integration not only improves allocative efficiency by gains from trade but also incentivizes new investment in renewable power plants. To test our theoretical predictions, we examine how recent grid expansions in the Chilean electricity market changed electricity production, wholesale prices, generation costs, and renewable investments. We then build a structural model of power plant entry to quantify the impact of market integration with and without the investment effects. We find that the market integration in Chile increased solar generation by around 180%, saved generation costs by 8%, and reduced carbon emissions by 5%. A substantial amount of renewable entry would not have occurred in the absence of market integration. Our findings suggest that ignoring these investment effects would substantially understate the benefits of market integration and its important role in expanding renewable energy.This article has received funding from the European Research Council (ERC) under the European Union's Horizon 2020 research and innovation programme (grant agreement 101001732-ENECML).Peer reviewedJohn Wiley & SonsEuropean Commission202420242023info:eu-repo/semantics/articlehttp://purl.org/coar/resource_type/c_6501application/pdfhttp://hdl.handle.net/10261/354725https://api.elsevier.com/content/abstract/scopus_id/85173766427reponame:DIGITAL.CSIC. Repositorio Institucional del CSICinstname:Consejo Superior de Investigaciones Científicas (CSIC)Inglés#PLACEHOLDER_PARENT_METADATA_VALUE#info:eu-repo/grantAgreement/EC/H2020/101001732https://doi.org/10.3982/ECTA20769Noinfo:eu-repo/semantics/openAccessoai:dnet:digitalcsic_::d9646ebb99c6fdead89794e936a8dc712026-05-22T06:33:51Z
dc.title.none.fl_str_mv The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile
title The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile
spellingShingle The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile
Gonzales, Luis E.
Market integration
Renewable energy
Transmission expansion
Wholesale electricity markets
title_short The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile
title_full The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile
title_fullStr The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile
title_full_unstemmed The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile
title_sort The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile
dc.creator.none.fl_str_mv Gonzales, Luis E.
Ito, Koichiro
Reguant, Mar
author Gonzales, Luis E.
author_facet Gonzales, Luis E.
Ito, Koichiro
Reguant, Mar
author_role author
author2 Ito, Koichiro
Reguant, Mar
author2_role author
author
dc.contributor.none.fl_str_mv European Commission
dc.subject.none.fl_str_mv Market integration
Renewable energy
Transmission expansion
Wholesale electricity markets
topic Market integration
Renewable energy
Transmission expansion
Wholesale electricity markets
description We study the investment effects of market integration on renewable energy expansion. Our theory highlights that market integration not only improves allocative efficiency by gains from trade but also incentivizes new investment in renewable power plants. To test our theoretical predictions, we examine how recent grid expansions in the Chilean electricity market changed electricity production, wholesale prices, generation costs, and renewable investments. We then build a structural model of power plant entry to quantify the impact of market integration with and without the investment effects. We find that the market integration in Chile increased solar generation by around 180%, saved generation costs by 8%, and reduced carbon emissions by 5%. A substantial amount of renewable entry would not have occurred in the absence of market integration. Our findings suggest that ignoring these investment effects would substantially understate the benefits of market integration and its important role in expanding renewable energy.
publishDate 2023
dc.date.none.fl_str_mv 2023
2024
2024
dc.type.none.fl_str_mv info:eu-repo/semantics/article
http://purl.org/coar/resource_type/c_6501
format article
dc.identifier.none.fl_str_mv http://hdl.handle.net/10261/354725
https://api.elsevier.com/content/abstract/scopus_id/85173766427
url http://hdl.handle.net/10261/354725
https://api.elsevier.com/content/abstract/scopus_id/85173766427
dc.language.none.fl_str_mv Inglés
language_invalid_str_mv Inglés
dc.relation.none.fl_str_mv #PLACEHOLDER_PARENT_METADATA_VALUE#
info:eu-repo/grantAgreement/EC/H2020/101001732
https://doi.org/10.3982/ECTA20769
No
dc.rights.none.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv John Wiley & Sons
publisher.none.fl_str_mv John Wiley & Sons
dc.source.none.fl_str_mv reponame:DIGITAL.CSIC. Repositorio Institucional del CSIC
instname:Consejo Superior de Investigaciones Científicas (CSIC)
instname_str Consejo Superior de Investigaciones Científicas (CSIC)
reponame_str DIGITAL.CSIC. Repositorio Institucional del CSIC
collection DIGITAL.CSIC. Repositorio Institucional del CSIC
repository.name.fl_str_mv
repository.mail.fl_str_mv
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