DP15705 The Energy Transition: An Industrial Economics Perspective

Author(s): Natalia Fabra
Publication Date: January 2021
Date Revised: March 2021
Keyword(s): auctions, Carbon Emissions, Competition, Dynamic pricing, Energy, invecstment, market design, market power, Storage
JEL(s): L22, L94
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15705

Addressing climate change requires full decarbonization of our economies. Whether this objective is achieved at least cost for society hinges on good policy design. In turn, this calls for a thorough understanding of firms' and consumers' incentives in the presence of asymmetric information, the determinants of strategic interaction, and the impact of market design and market structure on the intensity of competition. Industrial Economics thus has much to contribute towards a successful Energy Transition, while benefiting from the exciting research opportunities it brings. In this paper, I survey some of the recent developments in this area. My focus is on the power sector, and in particular, on the regulatory and market design challenges triggered by the expansion of intermittent renewables with almost zero marginal costs. I conclude with some questions that merit further research.