Advanced Search
MyIDEAS: Login to save this paper or follow this series

Merchant Transmission Investment

Contents:

Author Info

  • Joskow, Paul
  • Tirole, Jean

Abstract

We examine the performance attributes of a merchant transmission investment framework that relies on “market driven” transmission investment to provide the infrastructure to support competitive wholesale markets for electricity. Under a stringent set of assumptions, the merchant investment model has a remarkable set of attributes that appear to solve the natural monopoly problem and the associated need for regulating transmission companies traditionally associated with electric transmission networks. We expand the merchant model upon which these conclusions are based to incorporate imperfections in wholesale electricity markets, lumpiness in transmission investment opportunities, stochastic attributes of transmission networks and associated property rights definition issues, the effects of the behavior of system operators and transmission owners on transmission capacity and reliability, coordination and bargaining considerations, forward contract, commitment and asset specificity issues. Incorporating these more realistic attributes of transmission networks and the behavior of transmission owners and system operators significantly undermines the attractive properties of the merchant investment model. Relying primarily on a market driven investment framework to govern investment in electric transmission networks is likely to lead to inefficient investment decisions and undermine the performance of competitive markets for electricity. A significant research challenge is to design regulatory mechanisms for system operators and incumbent transmission owners and a better framework for defining transmission property rights that will stimulate efficient investments by regulated incumbent transmission owners and by merchant entrants responding to market opportunities when they are the most efficient suppliers.

(This abstract was borrowed from another version of this item.)

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 263.

as in new window
Length:
Date of creation: 2004
Date of revision:
Publication status: Published in The Journal of Industrial Economics, vol.�53, n°2, juin 2005, p.�233-264.
Handle: RePEc:ide:wpaper:631

Contact details of provider:
Postal: Manufacture des Tabacs, Aile Jean-Jacques Laffont, 21 Allée de Brienne, 31000 TOULOUSE
Phone: +33 (0)5 61 12 85 89
Fax: + 33 (0)5 61 12 86 37
Email:
Web page: http://www.idei.fr/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Vogelsang, Ingo, 2001. "Price Regulation for Independent Transmission Companies," Journal of Regulatory Economics, Springer, vol. 20(2), pages 141-65, September.
  2. Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-42, September.
  3. Bushnell, James & Stoft, Steven, 1997. "Improving Private Incentives for Electric Grid Investment," Staff General Research Papers 31549, Iowa State University, Department of Economics.
  4. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
  5. Glachant, Jean-Michel & Pignon, Virginie, 2005. "Nordic congestion's arrangement as a model for Europe? Physical constraints vs. economic incentives," Utilities Policy, Elsevier, vol. 13(2), pages 153-162, June.
  6. Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-24, March.
  7. Robert Wilson, 2002. "Architecture of Power Markets," Econometrica, Econometric Society, vol. 70(4), pages 1299-1340, July.
  8. Thomas-Olivier Leautier, 2000. "Regulation of an Electric Power Transmission Company," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 61-92.
  9. Bushnell, James B & Stoft, Steven E, 1996. "Electric Grid Investment under a Contract Network Regime," Journal of Regulatory Economics, Springer, vol. 10(1), pages 61-79, July.
  10. Chisari, Omar O. & Dal-Bo, Pedro & Romero, Carlos A., 2001. "High-tension electricity network expansions in Argentina: decision mechanisms and willingness-to-pay revelation," Energy Economics, Elsevier, vol. 23(6), pages 697-715, November.
  11. Bushnell, James, 1999. "Transmission Rights and Market Power," The Electricity Journal, Elsevier, vol. 12(8), pages 77-85, October.
  12. Brousseau, Eric & Glachant, Jean-Michel, 2002. "The economics of contracts: Theories and applications," Economics Papers from University Paris Dauphine 123456789/12331, Paris Dauphine University.
  13. Wu, Felix, et al, 1996. "Folk Theorems on Transmission Access: Proofs and Counterexamples," Journal of Regulatory Economics, Springer, vol. 10(1), pages 5-23, July.
  14. Oren, Shmuel S. & Spiller, Pablo T. & Varaiya, Pravin & Wu, Felix, 1995. "Nodal prices and transmission rights: A critical appraisal," The Electricity Journal, Elsevier, vol. 8(3), pages 24-35, April.
  15. Holmstrom, Bengt & Tirole, Jean, 2000. "Liquidity and Risk Management," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 295-319, August.
  16. Joshua S. Gans & Stephen P. King, 2000. "Options for Electricity Transmission Regulation in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 33(2), pages 145-160.
  17. Shmuel S. Oren, 1997. "Economic Inefficiency of Passive Transmission Rights in Congested Electricity Systems with Competitive Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 63-83.
  18. Green, Richard, 1997. "Transmission pricing in England and Wales," Utilities Policy, Elsevier, vol. 6(3), pages 185-193, September.
  19. Chao, Hung-Po & Peck, Stephen, 1996. "A Market Mechanism for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 10(1), pages 25-59, July.
  20. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  21. Joskow, Paul L & Tirole, Jean, 1999. "Transmission Rights and Market Power on Electric Power Networks I: Financial Rights," CEPR Discussion Papers 2093, C.E.P.R. Discussion Papers.
  22. Steven Stoft, 1999. "Financial Transmission Rights Meet Cournot: How TCCs Curb Market Power," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-23.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ide:wpaper:631. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.