German power market has undergone many fundamental changes in 2011 following the Fukushima nuclear accident (March 2011). Prices on wholesale electricity market are at the highest level since mid-2009. The purpose of this chapter is to identify whether market power is responsible for this increase. Following the method of linear programming as commonly used in the literature of electricity market modelling, we simulate a competitive benchmark for German wholesale market taking into account power plant characteristics, fuel and CO2-allowance prices and renewables power generation. On the basis of the difference between modeled marginal costs and observed market prices, we estimate the price-cost markups, or the Lerner Indexes across hours.
Keywords: Electricity, market power, Germany, oligopolistic market
Jel Code: L13, L94, D43