2024/01/18 by Gugler, Klaus, Liebensteiner, Mario, Schmitt, Stephan
paper · doi:10.57938/c0a348a7-f510-4f0f-9737-76186ded5c90
The EU has been promoting unbundling of the transmission grid from other stages <br/>of the electricity supply chain with the aim of fostering competition in the upstream stage of <br/>electricity generation. At presence, ownership unbundling is the predominant form of <br/>unbundling in Europe. However, the benefits of increased competition from ownership <br/>unbundling of the transmission grid may come at the cost of lost vertical synergies between the <br/>formerly integrated stages of electricity supply. The policy debate generally neglects such <br/>potential costs of unbundling, yet concentrates on its benefits. Therefore European crosscountry <br/>evidence may shed some light on this issue. This study helps fill this void by <br/>empirically estimating the magnitude of economies of vertical integration (EVI) between <br/>electricity generation and transmission based on a quadratic cost function. For this purpose <br/>we employ novel firm-level panel data of major European electricity utilities. Our results <br/>confirm the presence of substantial EVI, which put the policy measure of transmission <br/>ownership unbundling into question. (authors' abstract)