Extended Price Cap Mechanism for Efficient Transmission Expansion under Nodal Pricing
AbstractThis paper examines the regulatory incentive mechanisms for efficient investment in the transmission network under the ISO and Gridco institutional framework. By considering a new element associated with power flow, we develop an extended price cap mechanism that can properly internalize technological externalities among transmission lines. We show that the new mechanism can induce the Gridco to achieve the long-term optimal capacity expansion in the presence of technological externalities, while the ISO continuously promotes efficient capacity utilization in the short run under nodal pricing. Copyright Springer Science+Business Media, LLC 2007
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Bibliographic InfoArticle provided by Springer in its journal Networks and Spatial Economics.
Volume (Year): 7 (2007)
Issue (Month): 3 (September)
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Web page: http://www.springerlink.com/link.asp?id=106607
Nodal pricing; Transmission capacity; Profit constraint; Incentive regulation; Price cap;
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- Juan Rosellón & Ingo Vogelsang & Hannes Weigt, 2010.
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Discussion Papers of DIW Berlin
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- Juan Rosellón, Ingo Vogelsang, and Hannes Weigt, 2012. "Long-run Cost Functions for Electricity Transmission," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
- Rosellón, Juan & Vogelsang, Ingo & Weigt, Hannes, 2009. "Long-run Cost Functions for Electricity Transmission," MPRA Paper 22842, University Library of Munich, Germany.
- Juan Rosellon & Ingo Vogelsang & Hannes Weigt, 2009. "Long-run Cost Functions for Electricity Transmission," Documentos de Trabajo DTE 465, CIDE, Division de Economia.
- 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.
- Dagobert L. Brito & Juan Rosellón, 2010.
"Lumpy Investment in Regulated Natural Gas Pipelines: An Application of the Theory of the Second Best,"
Discussion Papers of DIW Berlin
1024, DIW Berlin, German Institute for Economic Research.
- Dagobert Brito & Juan Rosellón, 2011. "Lumpy Investment in Regulated Natural Gas Pipelines: An Application of the Theory of the Second Best," Networks and Spatial Economics, Springer, vol. 11(3), pages 533-553, September.
- 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.
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