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Transmission investment in the Peruvian electricity market: Theory and applications

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  • Ruiz, Erix
  • Rosellón, Juan

Abstract

This research presents an application of the mechanism in Hogan et al. (2010) (HRV) to promote electricity transmission network expansion in the Peruvian electricity transmission system known as SEIN (Sistema Eléctrico Interconectado Nacional). The HRV mechanism combines the merchant and regulatory approaches to promote investment into transmission grids. This mechanism gives incentives for efficient investment in expansion of the network by rebalancing over time the fixed and variable charges of a two-part tariff in the framework of a wholesale electricity market with locational pricing. The expansion of the network is carried out through the sale of Financial Transmission Rights (FTRs) for the congested lines. The mechanism is applied for 103 nodes of the SEIN using detailed characteristics of generators, nodes and transmission lines. Under Laspeyres weights and linear cost of expansion of transmission capacity, it is shown that prices converge to lower price levels as a result of increased transmission capacity.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 47 (2012)
Issue (Month): C ()
Pages: 238-245

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Handle: RePEc:eee:enepol:v:47:y:2012:i:c:p:238-245

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

Related research

Keywords: Electricity transmission expansion; Incentive regulation; Peru;

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References

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  1. Juan Rosellón & Zdeñka Myslíková & Eric Zenón, 2009. "Incentives for Transmission Investment in the PJM Electricity Market: FTRs or Regulation (or both?)," Working papers DTE 463, CIDE, División de Economía.
  2. Juan Rosellon & William Hogan & Ingo Vogeslang, 2007. "Toward a Combined Merchant-Regulatory Mechanism for Electricity Transmission Expansion," Working papers DTE 389, CIDE, División de Economía.
  3. Juan Rosell�n & Hannes Weigt, 2011. "A Dynamic Incentive Mechanism for Transmission Expansion in Electricity Networks: Theory, Modeling, and Application," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 119-148.
  4. Ingo Vogelsang, 2006. "Electricity Transmission Pricing and Performance-based Regulation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 97-126.
  5. Vogelsang, Ingo, 2001. "Price Regulation for Independent Transmission Companies," Journal of Regulatory Economics, Springer, vol. 20(2), pages 141-65, September.
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Cited by:
  1. Jonas Egerer & Juan Rosellón & Wolf-Peter Schill, 2013. "Power System Transformation towards Renewables: An Evaluation of Regulatory Approaches for Network Expansion," Discussion Papers of DIW Berlin 1312, DIW Berlin, German Institute for Economic Research.

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