Thu, Sep 16|
Akshaya Jha, Carnegie Mellon University
Start-up Costs and Market Power: Lessons from the Renewable Energy Transition
Time & Location
Sep 16, 2021, 3:00 PM – 4:15 PM EDT
NC State, Bostian Hall 3712, 2721 Pillsbury Circle, Raleigh, NC 27695
About the Event
Firms expect to recover the xed costs required to start production by earning positive operating prots in subsequent periods. We develop a dynamic measure of competition that accounts for start-up costs, showing that static markups overstate the rents attributable to market power in an electricity market where power plants frequently stop and start production in response to output from solar panels. We estimate that increases in solar capacity correspond to increases in the aggregate operating prots earned by fossil-fuel plants because competition softens at sunset---plants displaced by solar during the day must incur start-up costs to compete in the evening.