Crampes, C. and Moreaux, M.

" Water resource and power generation"

JEL codes: L12; L13; Q25; Q42.
Keywords: Water resource; Hydroelectricity; Cournot competition Closed and Open-loop games

Abstract: We propose a simple model of competition between a thermal station and an hydrostation for the production of energy. We show that, despite the static characteristics of the thermal cost function, the thermal output is determined by intertemporal considerations. This results from the scarcity of the water resource which is storable at zero operating cost. We analyze the combination of these technologies in the case of a social planner who maximizes the net total utility from electricity, in the case of private monopoly either regulated or not and, finally, in the case of duopolistic competition in quantities where each private firm operates either a hydraulic power station, or a thermal power station.