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Optimal Transmission Regulation in an Integrated Energy Market

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  • Tangerås, Thomas P.

    ()
    (Research Institute of Industrial Economics (IFN))

Abstract

The capacity of the transmission network determines the extent of integration of a multinational energy market. Cross-border externalities render coordination of network maintenance and investments across countries valuable. Is it then optimal to collect powers in the hands of a single regulator? Should a common system operator manage the entire network? I show that optimal network structure depends on (i ) how the common regulator would balance the interests of the different member states; (ii ) how the gains from market integration vary across countries; (iii ) network characteristics (substitutability versus complementarity); and (iv ) the social cost of operator rent.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 838.

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Length: 38 pages
Date of creation: 01 Jun 2010
Date of revision:
Handle: RePEc:hhs:iuiwop:0838

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Keywords: Multi-national Energy Market; Transmission; Supranational Regulation; System Operation; Multi-contracting;

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  1. Laffont, Jean-Jacques & Pouyet, Jérôme, 2000. "The Subsidiarity Bias in Regulation," IDEI Working Papers 96, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Pollitt, M., 2007. "The arguments for and against ownership unbundling of energy transmission networks," Cambridge Working Papers in Economics 0737, Faculty of Economics, University of Cambridge.
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  9. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
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  12. Richard J. Gilbert & Michael H. Riordan, 1995. "Regulating Complementary Products: A Comparative Institutional Analysis," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 243-256, Summer.
  13. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
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