Building Blocks: Investment in Renewable andNon-Renewable Technologies

Within a span of 20 years, the electric power industry has become the central focus oftwo extraordinary policy trends, each one significant enough to fundamentally reshape theindustry. One of these trends is liberalization, a term that has come to encompass bothprivatization and regulatory restructuring. Beginning with the visions articulated in such worksas Joskow and Schmalansee (1985) and Schweppe et al. (1988), the restructuring movement inelectricity can be viewed as an extension of the trend toward market liberalization that hadpreviously transformed the airline, communications, and natural gas industries. The generationsector of the industry has undergone a sporadic but inexorable transition from economicregulation under cost-of-service principles to an environment in which markets heavilyinfluence, if not dominate, the remuneration and investment decisions of firms.[...]