The energy transition: an Industrial economics perspective

Abstract

Addressing climate change requires full decarbonization of our economies. Whether this objective is achieved at least cost for society hinges on good policy design. In turn, this calls for a thorough understanding of firms’ and consumers’ incentives in the presence ofasymmetric information, the determinants of strategic interaction, and the impact of mar- ket design and market structure on the intensity of competition. Industrial Economics thushas much to contribute towards a successful Energy Transition, while benefiting from theexciting research opportunities it brings. In this paper, I survey some of the recent devel- opments in this area. My focus is on the power sector, and in particular, on the regulatory and market design challenges triggered by the expansion of intermittent renewables with almost zero marginal costs. I conclude with some questions that merit further research.