The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile

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dc.contributor.authorGonzales, Luis E.
dc.contributor.authorIto, Koichiro
dc.contributor.authorReguant, Mar
dc.date.accessioned2025-01-20T17:25:04Z
dc.date.available2025-01-20T17:25:04Z
dc.date.issued2023
dc.description.abstractWe study the investment effects of market integration on renewable energy expansion. Our theory highlights that market integration not only improves allocative efficiency by gains from trade but also incentivizes new investment in renewable power plants. To test our theoretical predictions, we examine how recent grid expansions in the Chilean electricity market changed electricity production, wholesale prices, generation costs, and renewable investments. We then build a structural model of power plant entry to quantify the impact of market integration with and without the investment effects. We find that the market integration in Chile increased solar generation by around 180%, saved generation costs by 8%, and reduced carbon emissions by 5%. A substantial amount of renewable entry would not have occurred in the absence of market integration. Our findings suggest that ignoring these investment effects would substantially understate the benefits of market integration and its important role in expanding renewable energy.
dc.fuente.origenWOS
dc.identifier.doi10.3982/ECTA20769
dc.identifier.eissn1468-0262
dc.identifier.issn0012-9682
dc.identifier.urihttps://doi.org/10.3982/ECTA20769
dc.identifier.urihttps://repositorio.uc.cl/handle/11534/91531
dc.identifier.wosidWOS:001095960900004
dc.issue.numero5
dc.language.isoen
dc.pagina.final1693
dc.pagina.inicio1659
dc.revistaEconometrica
dc.rightsacceso restringido
dc.subjectRenewable energy
dc.subjectmarket integration
dc.subjectwholesale electricity markets
dc.subjecttransmission expansion
dc.subject.ods07 Affordable and Clean Energy
dc.subject.odspa07 Energía asequible y no contaminante
dc.titleThe Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile
dc.typeartículo
dc.volumen91
sipa.indexWOS
sipa.trazabilidadWOS;2025-01-12
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