IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Powering Progress: Restructuring, Competition, and R&D in the U.S. Electric Utility Industry

Abstract:
This paper investigates the R&D behavior of regulated firms when they transition to a competitive environment. Using data from the US electricity market from 1990-2000, we analyze how competition, institutional changes, and political constraints have contributed to the precipitous decline in R&D expenditure by regulated utilities. We find that firms reduce their R&D significantly at the very early stages of restructuring or even when they expect restructuring to occur. Once the emerging institutional structure becomes clear, R&D spending recovers but is later offset by another decline when restructuring legislation is enacted. In addition, greater competition and the nearing of such competition adversely affects research spending. In aggregate, R&D declines by 78.6 percent after electricity markets are restructured. Firm and state characteristics matter, and a majority of the research is conducted by large generation companies located in pro-research states, especially if they are part of a larger holding company. Such characteristics have a different impact on research spending in the pre-and post-restructured periods.

Purchase ( $25 )

Energy Specializations: Electricity – Markets and Prices ; Electricity – Policy and Regulation; Energy and the Economy – Energy as a Productive Input; Energy and the Economy –Economic Growth and Energy Demand; Energy and the Economy – Resource Endowments and Economic Performance; Energy and the Economy – Energy Shocks and Business Cycles

JEL Codes: L94: Electric Utilities, L95: Gas Utilities; Pipelines; Water Utilities, Q41: Energy: Demand and Supply; Prices, Q42: Alternative Energy Sources, Q53: Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling, Q54: Climate; Natural Disasters and Their Management; Global Warming

Keywords: R&D, Regulation, competition, electricity restructuring, electric utilities, US

DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No2-3

Published in Volume 30, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

© 2023 International Association for Energy Economics | Privacy Policy | Return Policy