Discussion paper

DP18458 Fossil Fuels and Renewable Energy: Mix or Match?

A profound shift in the ownership structures of energy companies is currently underway, transitioning from diversified technology portfolios to a focus on either renewable energy or fossil fuels. This paper examines the competitive consequences of this transformation on the performance of oligopolistic electricity markets. Our analysis reveals that competition among diversified firms is more intense compared to specialized firms. However, the ranking in terms of productive efficiency tends to favor the specialized ownership structure. Overall, simulations using Spanish data and planned future investments in renewable energy show that the diversified structure is usually socially preferable. Methodologically, our analysis offers novel insights for the study of multi-unit auctions with cost heterogeneity and privately known capacities.


Fabra, N and G Llobet (2023), ‘DP18458 Fossil Fuels and Renewable Energy: Mix or Match?‘, CEPR Discussion Paper No. 18458. CEPR Press, Paris & London. https://cepr.org/publications/dp18458