Transmission constraints and strategic underinvestment in electric power generation
AbstractThis article is the first to examine electric power producers' investment decisions when competition is imperfect and the transmission grid congested. This analysis yields numerous original insights. First, congestion on the grid is transient, and may disappear when demand is highest. Second, transmission capacity increases have complex impacts on generation: they may increase, decrease, or have no impact on the marginal value of generation, and may have similar or opposite impacts on the marginal value of different technologies. Third, the true social value of transmission, including its impact on investment, may be significantly lower than is commonly assumed.
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Bibliographic InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 816.
Date of creation: 06 Jan 2014
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electric power markets; imperfect competition; investment; transmission constraints;
Find related papers by JEL classification:
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-08 (All new papers)
- NEP-COM-2014-02-08 (Industrial Competition)
- NEP-ENE-2014-02-08 (Energy Economics)
- NEP-IND-2014-02-08 (Industrial Organization)
- NEP-REG-2014-02-08 (Regulation)
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