Since electricity markets were deregulated, prices have risen but investments in new capacity have not followed suit. According to theory, generators are going to invest in new capacity if market prices go above long term marginal costs for new production. Since this has not happened, some critics of the deregulation conclude that the design of the deregulated market is at fault. In this Ph.D. thesis, also been published as an Elforsk report, author Petter Rönnborg offers an alternative explanation for the lack of investment. The author focuses on the assumption that generators are rational actors that try to maximize profits by reacting to price signals. The author questions this assumption, and tries, through a number of interviews and case studies, to find out how generators really reason when they make decisions to invest in new production capacity.
The conclusions from the study do not make happy reading for readers that want more competition and lower electricity prices in the future, or for readers that would like to see a large-scale transformation of the electricity production system into a system based on renewable energy sources. The conclusion is that actors that have the power to change the system do not want to do this, and that actors that do want to change the system are too small to make a difference. The author believes that politicians that want to improve the way the electricity market works and increase the use of renewable energy will not achieve anything by making changes to the regulatory framework that governs the electricity market. A far more efficient path would be to exploit the fact that the government has ownership stakes in many large scale producers. The author points to experiences with municipal power generators that have started working with renewable energy sources after receiving orders from their owners to do so.