Comparing divestments and VPPs in electricity generation markets

We study the impact of electricity divestments of intermediate size in a stylised model where a dominant producer faces a competitive fringe with the same cost structure and is forced to sell some of its capacity. We find that the divestment which achieves the greatest reduction in prices can be several times more effective in reducing prices than a divestment of baseload (or low-cost) plants. We also compare divestments of intermediate size and virtual power plants (VPPs), establishing that VPPs are significantly less effective than the optimal divestment.