Electricity Transmission Pricing: How much does it cost to get it wrong?
AbstractEconomists know how to calculate optimal prices for electricity transmission. These are rarely applied in practice. This paper develops a thirteen node model of the transmission system in England and Wales, incorporating losses and transmission constraints. It is solved with optimal prices, and with uniform prices for demand and for generation, re-dispatching when needed to take account of transmission constraints. Moving from uniform prices to optimal nodal prices could raise welfare by 1.5% of the generators’ revenues, and would be less vulnerable to market power. It would also send better investment signals, but create politically sensitive regional gains and losses.
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Bibliographic InfoPaper provided by Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research in its series Working Papers with number 0420.
Date of creation: Sep 2004
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Other versions of this item:
- Green, R., 2004. "Electricity Transmission Pricing: How much does it cost to get it wrong?," Cambridge Working Papers in Economics 0466, Faculty of Economics, University of Cambridge.
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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- Kattuman, P.A. & Green, R.J. & Bialek, J.W., 2001. "A Tracing Method for Pricing Inter-Area Electricity Trades," Cambridge Working Papers in Economics 0107, Faculty of Economics, University of Cambridge.
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Open Access publications from Katholieke Universiteit Leuven
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