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Different Approaches Towards Electricity Transmission Expansion

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  • Rosellón Juan

    ()
    (Centro de Investigación y Docencia Económicas (CIDE) and Harvard University)

Abstract

There is an intense debate regarding the best way to attract investment for the long-term expansion of an electricity transmission network. We study three hypotheses: the long-term financialtransmission- right hypothesis; the incentive-regulation hypothesis; and the market-power hypothesis. The first approach derives optimal transmission expansion through auctions of longterm financial transmission rights by an independent system operator. The second provides a Transco with incentives to expand the network by making it face the entire social cost of congestion. The third approach defines optimal transmission expansion according to the strategic behavior of generators. This paper discusses the analytical and practical strengths and weaknesses of each approach.

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Bibliographic Info

Article provided by De Gruyter in its journal Review of Network Economics.

Volume (Year): 2 (2003)
Issue (Month): 3 (September)
Pages: 1-32

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Handle: RePEc:bpj:rneart:v:2:y:2003:i:3:n:3

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Cited by:
  1. Gert Brunekreeft & David Newbery, 2006. "Should merchant transmission investment be subject to a must-offer provision?," Journal of Regulatory Economics, Springer, vol. 30(3), pages 233-260, November.
  2. Makoto TANAKA, 2005. "Optimal Transmission Capacity under Nodal Pricing and Incentive Regulation for Transco," Discussion papers 05021, Research Institute of Economy, Trade and Industry (RIETI).
  3. Sun, Junjie, 2005. "U.S. Financial Transmission Rights: Theory and Practice," Staff General Research Papers 12266, Iowa State University, Department of Economics.
  4. Zenon, Eric & Rosellon, Juan, 2010. "Expansión de las Redes de Transmisión Eléctrica en Norteamérica: Teoría y Aplicaciones
    [The Expansion of Electricity Networks in North America: Theory and Applications]
    ," MPRA Paper 26470, University Library of Munich, Germany.
  5. Brunekreeft, G., 2004. "‘Regulatory Issues in Merchant Transmission Investment’," Cambridge Working Papers in Economics 0422, Faculty of Economics, University of Cambridge.
  6. Pollitt, M. J., 2011. "Lessons from the History of Independent System Operators in the Energy Sector, with applications to the Water Sector," Cambridge Working Papers in Economics 1153, Faculty of Economics, University of Cambridge.
  7. Rosellon, Juan & Tregear, Juan & Zenon, Eric, 2010. "El modelo HRV para expansión óptima de redes de transmisión: una aplicación a la red eléctrica de Ontario
    [The HRV Model for the Optimal Expansion of Transmission Networks: an Application to t
    ," MPRA Paper 26471, University Library of Munich, Germany.
  8. SMEERS, Yves, 2005. "Long term locational prices and investment incentives in the transmission of electricity," CORE Discussion Papers 2005030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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