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The Competitive Effects of Transmission Infrastructure in the Indian Electricity Market

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  • Nicholas Ryan

Abstract

The integration of markets may improve efficiency by lowering costs or reducing local market power. India, seeking to reduce electricity shortages, set up a new power market, in which transmission constraints sharply limit trade between regions. During congested hours, measures of market competitiveness fall and firms raise bid prices. I use confidential bidding data to estimate the costs of power supply and simulate market outcomes with more transmission capacity. Counterfactual simulations show that transmission expansion increases market surplus by 22 percent, enough to justify the investment. One-third of this gain is due to sellers' response to a more integrated grid.

Suggested Citation

  • Nicholas Ryan, 2021. "The Competitive Effects of Transmission Infrastructure in the Indian Electricity Market," American Economic Journal: Microeconomics, American Economic Association, vol. 13(2), pages 202-242, May.
    • Handle: RePEc:aea:aejmic:v:13:y:2021:i:2:p:202-42
    DOI: 10.1257/mic.20180191
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    Citations

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    Cited by:

    1. Astier, Nicolas & Ovaere, Marten, 2022. "Reliability standards and generation adequacy assessments for interconnected electricity systems," Energy Policy, Elsevier, vol. 168(C).
    2. Luis E. GONZALES & ITO Koichiro & Mar REGUANT, 2022. "The Dynamic Impact of Market Integration: Evidence from renewable energy expansion in Chile," Discussion papers 22050, Research Institute of Economy, Trade and Industry (RIETI).
    3. repec:hal:wpspec:info:hdl:2441/1qif9fqehq930ovnr511k1el4f is not listed on IDEAS
    4. Nicholas Ryan, 2020. "Holding Up Green Energy," Cowles Foundation Discussion Papers 2294, Cowles Foundation for Research in Economics, Yale University.
    5. Michele Fioretti & Jorge Tamayo, 2021. "Saving for a Dry Day: Coal, Dams, and the Energy Transition," Working Papers hal-03389152, HAL.
    6. repec:hal:spmain:info:hdl:2441/1qif9fqehq930ovnr511k1el4f is not listed on IDEAS
    7. LaRiviere, Jacob & Lyu, Xueying, 2022. "Transmission constraints, intermittent renewables and welfare," Journal of Environmental Economics and Management, Elsevier, vol. 112(C).
    8. Athawale, Rasika & Felder, Frank A., 2023. "Overbuilding transmission: A case study and policy analysis of the Indian power sector," Energy Policy, Elsevier, vol. 174(C).
    9. Gregor Singer, 2024. "Complementary Inputs and Industrial Development: Can Lower Electricity Prices Improve Energy Efficiency?," CESifo Working Paper Series 10944, CESifo.

    More about this item

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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