Journal article 81 views
Higher prices in a more competitive market: The paradox in the retail electricity market in the United Kingdom
,
Nigel O'Leary ,
Jing Shao
Structural Change and Economic Dynamics, Volume: 72, Pages: 374 - 390
Swansea University Authors:
Jinke Li , Nigel O'Leary , Jing Shao
Full text not available from this repository: check for access using links below.
DOI (Published version): 10.1016/j.strueco.2024.12.001
Abstract
The UK retail electricity market experienced a decline in market concentration as new suppliers (retailers) competed with traditional incumbents. Concurrently, consumer-funded schemes were implemented to support low-carbon electricity generation. To disentangle the effects of these two developments...
| Published in: | Structural Change and Economic Dynamics |
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| ISSN: | 0954-349X 1873-6017 |
| Published: |
Elsevier BV
2025
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| Online Access: |
Check full text
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| URI: | https://cronfa.swan.ac.uk/Record/cronfa68401 |
| Abstract: |
The UK retail electricity market experienced a decline in market concentration as new suppliers (retailers) competed with traditional incumbents. Concurrently, consumer-funded schemes were implemented to support low-carbon electricity generation. To disentangle the effects of these two developments on the retail price, an autoregressive distributed lag (ARDL) cointegration model was applied to monthly data from 2010 to 2019. Results indicate that, while the costs of consumer-funded schemes contributed to the rising retail price, the declining market concentration unexpectedly pushed the retail price upward. Analysis of the six large suppliers shows that incumbents struggled to lower indirect costs as sales volumes fell, passing higher indirect costs per megawatt-hour to consumers. However, due to competitive pressure from new suppliers, incumbents were constrained from raising retail prices to fully cover these higher costs, resulting in lower profit margins. Thus, competition was evident not through lower retail prices but through its effect on incumbents' profitability. |
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| Keywords: |
Electricity market, retail electricity price, market concentration, consumer-funded schemes, indirect costs |
| College: |
Faculty of Humanities and Social Sciences |
| Funders: |
This research received no specific grant from funding agencies in the public, commercial, or not-for-profit sectors. |
| Start Page: |
374 |
| End Page: |
390 |