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Governance of competitive transmission investment in weak institutional systems

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  • Abdala, Manuel A.

Abstract

Despite progress in economic analysis in recent years, transmission investment governance still poses policy design challenges in competitive electricity systems. The degree of regulatory intervention in allocating investment costs is a central issue. Scholars tend to agree that centralized solutions are almost inevitable, mainly due to free riding and coordination problems. In systems with weak institutional endowments and pressures of distributive politics, however, there is an increased likelihood of regulators acting opportunistically or imposing arbitrary changes to the cost allocation rules, which makes centralized solutions less desirable. We provide some examples from Argentina, El Salvador and Peru and suggest that a two-tier governance scheme composed of a self-governing Forum of transmission stakeholders, with regulation as a subsidiary measure, may be a more adequate design to restraint undue government interference. The expected outcome is twofold: a better match with users' preferences and a restraint to government opportunism and arbitrariness. Measuring the robustness of this scheme in minimizing the risks for either too much or too little investment will certainly require further research.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 30 (2008)
Issue (Month): 4 (July)
Pages: 1306-1320

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Handle: RePEc:eee:eneeco:v:30:y:2008:i:4:p:1306-1320

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Web page: http://www.elsevier.com/locate/eneco

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  6. Paul Joskow & Jean Tirole, 2003. "Merchant Transmission Investment," Working Papers 0304, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
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  10. Weingast, Barry R, 1995. "The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(1), pages 1-31, April.
  11. Abdala, Manuel A., 2008. "Transmission pricing in privately-owned electricity grids: An illustration from the Argentine electricity pool," Energy Economics, Elsevier, vol. 30(4), pages 1284-1305, July.
  12. Chao, Hung-Po & Peck, Stephen, 1996. "A Market Mechanism for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 10(1), pages 25-59, July.
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Citations

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Cited by:
  1. Littlechild, S.C. & Ponzano, E.A., 2007. "Transmission expansion in Argentina 5: the Regional Electricity Forum of Buenos Aires Province," Cambridge Working Papers in Economics 0762, Faculty of Economics, University of Cambridge.
  2. Halkos, George & Tzeremes, Nickolaos, 2012. "Carbon dioxide emissions and governance: A nonparametric analysis for the G-20," MPRA Paper 40387, University Library of Munich, Germany.
  3. Littlechild, Stephen C. & Skerk, Carlos J., 2008. "Transmission expansion in Argentina 2: The Fourth Line revisited," Energy Economics, Elsevier, vol. 30(4), pages 1385-1419, July.
  4. Littlechild, Stephen C. & Skerk, Carlos J., 2008. "Transmission expansion in Argentina 1: The origins of policy," Energy Economics, Elsevier, vol. 30(4), pages 1367-1384, July.
  5. Littlechild, Stephen C. & Skerk, Carlos J., 2008. "Transmission expansion in Argentina 3: The evolution of policy," Energy Economics, Elsevier, vol. 30(4), pages 1420-1461, July.
  6. Christine Brandstätt & Gert Brunekreeft & Nele Friedrichsen, 2013. "The need for more flexibility in the regulation of smart grids – Stakeholder involvement," Bremen Energy Working Papers 0013, Bremer Energie Institut.
  7. 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.

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