The impact of the Iberian Electricity Market on the competitive behavior of generating companies using a conjectural variations approach

The integration of the Portuguese and Spanish electricity markets came into force on the July 2007 with the creation of the Iberian Electricity Market (IBELM). The benefits of electricity markets integration such as efficiency gains and increased competition are recognized, as well as the shortcomings regarding market dominance and predatory behavior which can harm those benefits. Therefore, it is of utmost importance the study of the strategic behavior of market agents, especially the generating companies (GENCOS), and to understand the impact of market integration on their behavior. This paper addresses the impact of the IBELM on the strategic behavior of the three major Spanish GENCOS, by estimating their competitive behavior using a conjectural variation model. The behavior of the companies under analysis is then compared in average monthly periods before and after the implementation of the IBELM. The results show that the companies analyzed behaved more competitively after the implementation of the IBELM.