Competition in the Electricity Market

what effect will it have on the equilibrium of price and quantity if there is a change in the regulatory environment designed to encourage greater competition in electricity generation?

If the regulatory environment is successful in increasing competition we would expect lower prices and greater output. For example, if the regulators found a way to reduce barriers to entry. This would encourage more competitors into the market, leading to lower prices.

A lower price of electricity is likely to lead to a higher quantity, but, the effect will be limited. Demand for electricity is inelastic. Therefore, as price falls, there will only be a small % increase in quantity. (Electricity is mostly a necessity with few substitutes)

However, it might be worth saying that it is difficult for regulators to significantly increase competition in the Electric market. There are significant barriers to entry such as high fixed costs, economies of scale. All these make a significant increase in competition unlikely.