The Diversity of Design of TSOs
AbstractIt is puzzling today to explain diversity and imperfection of actual transmission monopoly designs in competitive electricity markets. We argue that transmission monopoly in competitive electricity markets has to be analysed within a Wilson (2002) modular framework. Applied to the management of electricity flows, at least three modules make the core of transmission design: 1° the short run management of network externalities; 2° the long run management of network investment; and 3° the coordination of neighboring Transmission System Operators for cross border trade. In order to tackle this diversity of designs of TSOs, we show that for each of these modules, three different basic ways of managing them are possible. Among the identified twenty seven options of organisation, we define an Ideal TSO. Second, we demonstrate that 1°monopoly design differs from this Ideal TSO and cannot handle these three modules irrespective of the “institutional” definition and allocation of property rights on transmission; while 2°definition and allocation of property rights on transmission cannot ignore the existing electrical industry and transmission network structure: they have to complement each other to be efficient. Some conclusions for regulatory issues of transmission systems operators are derived from this analysis of network monopoly organisation.
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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 0805.
Date of creation: May 2008
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Other versions of this item:
- Vincent Rious & Jean-Michel Glachant & Yannick Perez & Philippe Dessante, 2008. "The diversity of design of TSOs," Post-Print hal-00318518, HAL.
- Rious, V. & Glachant , J. & Perez, Y. & Dessante, P., 2008. "The Diversity of Design of TSOs," Cambridge Working Papers in Economics 0822, Faculty of Economics, University of Cambridge.
- L5 - Industrial Organization - - Regulation and Industrial Policy
- L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D62 - Microeconomics - - Welfare Economics - - - Externalities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-30 (All new papers)
- NEP-COM-2008-07-30 (Industrial Competition)
- NEP-ENE-2008-07-30 (Energy Economics)
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