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  • 2021
  • Working Paper
  • HBS Working Paper Series

Saving for a Dry Day: Coal, Dams, and the Energy Transition

By: Michele Fioretti and Jorge Tamayo
  • Format:Print
  • | Language:English
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Abstract

Renewable generation creates a tradeoff between current and future energy production as generators produce energy by releasing previously stored resources. Studying the Colombian market, we find that diversified firms strategically substitute fossil fuels for hydropower before droughts. This substitution mitigates the surge in market prices due to the lower hydropower capacity available during dry periods. Diversification can increase prices, instead, if it results from mergers steepening a firm’s residual demand. Thus, integrating production technologies within firms can smooth the clean-energy transition by offsetting higher prices during scarcity periods if the unaffected technologies help store renewables more than exercise market power.

Keywords

Energy Generation; Renewable Energy; Production; Green Technology Industry; Energy Industry; Colombia

Citation

Fioretti, Michele, and Jorge Tamayo. "Saving for a Dry Day: Coal, Dams, and the Energy Transition." Harvard Business School Working Paper, No. 22-016, August 2021.
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About The Author

Jorge Tamayo

Strategy
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More from the Authors
  • An Anatomy of Performance Monitoring By: Achyuta Adhvaryu, Anant Nyshadham and Jorge Tamayo
  • The Luck of the Draw: The Causal Effect of Physicians on Birth Outcomes By: Arlen Guarin, Christian Posso, Estefania Saravia and Jorge Tamayo
  • Diagnosing Quality: Learning, Amenities, and the Demand for Health Care By: Achyuta Adhvaryu, Emilio Gutierrez, Anant Nyshadham and Jorge Tamayo
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