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Nuclear Capacity Auctions

We propose nuclear capacity auctions as a means to correcting the incentives for investing in nuclear power. In particular, capacity auctions open the market for large-scale entry by outside firms. Requiring licensees to sell a share of capacity as virtual power plant contracts increases auction efficiency by mitigating incumbent producers' incentive to bid for market power. A motivating example is Sweden's policy reversal to allow new nuclear power to replace old reactors.

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JEL Codes: D44: Auctions, L11: Production, Pricing, and Market Structure; Size Distribution of Firms, Q40: Energy: General, Q41: Energy: Demand and Supply; Prices, D24: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity, C72: Noncooperative Games, C70: Game Theory and Bargaining Theory: General, D21: Firm Behavior: Theory

Keywords: Capacity auctions, Investments, Market power, Nuclear power, Virtual power plants

DOI: 10.5547/01956574.36.3.sfri

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Published in Volume 36, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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