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Allocating Transmission to Mitigate Market Power in Electricity Networks Author info | Abstract | Publisher info | Download info | Related research | Statistics Richard Gilbert
Neuhoff, K.
Newbery, D.
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We ask what conditions transmission contracts increase or mitigate market power. We show that the allocation process of transmission rights is crucial. In an efficient arbitraged uniform price auction, generators will only obtain contracts that mitigate their market power. However, if generators inherit transmission contracts or buy them in a ‘pay-as-bid’ auction, then these contracts can enhance market power. In the two-node network case, banning generators from holding transmission contracts that do not correspond to delivery of their own energy mitigates market power. Meshed networks differ in important ways as constrained links no longer isolate prices in competitive markets from market manipulation. The paper suggests ways of minimising market power considerations when designing transmission contracts.
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number
0225.
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Length: 37
Date of creation: Oct 2002Date of revision:
Handle: RePEc:cam:camdae:0225Note: CMI IO, Updated version: 1 April 2003Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm
For technical questions regarding this item, or to correct its listing, contact: (Howard Cobb).
Keywords: electricity ; contracts ; auction ; network ; transmission ; Other versions of this item:
Find related papers by JEL classification: D44 - Microeconomics - - Market Structure and Pricing - - - Auctions D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Paul L. Joskow & Richard Schmalensee, 1988.
"Markets for Power: An Analysis of Electrical Utility Deregulation ,"
MIT Press Books ,
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Full
references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Brunekreeft, G. & Neuhoff, K. & Newbery, D., 2004.
"Electricity transmission: an overview of the current debate ,"
Cambridge Working Papers in Economics
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[Downloadable!]
Other versions: Kupper Gerd & Willems Bert, 2007.
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Energy, Transport and Environment Working Papers Series
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Kupper, G. & Willems, Bert, 2007.
"Arbitrage in Energy Markets: Competing in the Incumbent's Shadow ,"
Discussion Paper
2007-034, Tilburg University, Tilburg Law and Economic Center.
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Cuadernos de Economía (Latin American Journal of Economics) ,
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Econometric Society 2004 Latin American Meetings
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"Should merchant transmission investment be subject to a must-offer provision? ,"
Journal of Regulatory Economics ,
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[Downloadable!] (restricted)
Other versions: Neuhoff, K., 2003.
"Integrating Transmission and Energy Markets Mitigates Market Power ,"
Cambridge Working Papers in Economics
0310, Faculty of Economics, University of Cambridge.
[Downloadable!]
Olmos, L. & Neuhoff, K., 2004.
"‘Definition of a Balancing Point for Electricity Transmission Contracts’ ,"
Cambridge Working Papers in Economics
0424, Faculty of Economics, University of Cambridge.
[Downloadable!]
EHRENMANN, Andreas & SMEERS, Yves, 2004.
"Inefficiencies in European congestion management proposals ,"
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2004090, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Richard Green, 2007.
"Nodal pricing of electricity: how much does it cost to get it wrong? ,"
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Twomey, P. & Green, R. & Neuhoff, K. & Newbery, D., 2005.
"A Review of the Monitoring of Market Power The Possible Roles of TSOs in Monitoring for Market Power Issues in Congested Transmission Systems ,"
Cambridge Working Papers in Economics
0504, Faculty of Economics, University of Cambridge.
[Downloadable!]
Other versions: Neuhoff, K. & Newbery, D., 2004.
"Integrating Energy Markets: Does Sequencing Matter? ,"
Cambridge Working Papers in Economics
0442, Faculty of Economics, University of Cambridge.
[Downloadable!]
Brunekreeft, G., 2003.
"Market-based Investment in Electricity Transmission Networks: Controllable Flow ,"
Cambridge Working Papers in Economics
0340, Faculty of Economics, University of Cambridge.
[Downloadable!]
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