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Energy Policy, Vol.26, No.13, 981-988, 1998
The effect of deregulation on US fossil fuel substitution in the generation of electricity
Fossil fuels produce the majority of electricity in the US with coal being by far the most popular fuel used, In the past regulation in the natural gas market in the form of well head price controls and under the boiler fuel use restrictions distorted fuel use away from natural gas. More recently with deregulation in the natural gas industry these restrictions have been repealed which has changed fuel use patterns. To measure the short run fuel use response from regulatory and other market changes we estimate interfuel substitution using two flexible functional forms-the translog and the logit- on monthly data from 1991 to 1993, In both models we find coal demand has the least elastic price response while gas and oil demand have the highest. Both models also suggest there is substitution across fuels in the short run but the patterns and magnitudes vary, From comparisons with earlier studies, fuel use price response is also found to vary across market conditions and regulatory regime.
Keywords:DEMAND