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Governance of competitive transmission investment in weak institutional systems

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  • Abdala, Manuel A.

Abstract

Despite progress in economic analysis in recent years, transmission investment governance still poses policy design challenges in competitive electricity systems. The degree of regulatory intervention in allocating investment costs is a central issue. Scholars tend to agree that centralized solutions are almost inevitable, mainly due to free riding and coordination problems. In systems with weak institutional endowments and pressures of distributive politics, however, there is an increased likelihood of regulators acting opportunistically or imposing arbitrary changes to the cost allocation rules, which makes centralized solutions less desirable. We provide some examples from Argentina, El Salvador and Peru and suggest that a two-tier governance scheme composed of a self-governing Forum of transmission stakeholders, with regulation as a subsidiary measure, may be a more adequate design to restraint undue government interference. The expected outcome is twofold: a better match with users' preferences and a restraint to government opportunism and arbitrariness. Measuring the robustness of this scheme in minimizing the risks for either too much or too little investment will certainly require further research.

Suggested Citation

  • Abdala, Manuel A., 2008. "Governance of competitive transmission investment in weak institutional systems," Energy Economics, Elsevier, vol. 30(4), pages 1306-1320, July.
  • Handle: RePEc:eee:eneeco:v:30:y:2008:i:4:p:1306-1320
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    References listed on IDEAS

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    Cited by:

    1. Littlechild, Stephen C. & Skerk, Carlos J., 2008. "Transmission expansion in Argentina 1: The origins of policy," Energy Economics, Elsevier, pages 1367-1384.
    2. Christine Brandstätt & Gert Brunekreeft & Nele Friedrichsen, 2013. "The Need for More Flexibility in the Regulation of Smart Grids – Stakeholder Involvement," Bremen Energy Working Papers 0013, Bremen Energy Research.
    3. Littlechild, Stephen C. & Skerk, Carlos J., 2008. "Transmission expansion in Argentina 3: The evolution of policy," Energy Economics, Elsevier, pages 1420-1461.
    4. Littlechild, Stephen C. & Ponzano, Eduardo A., 2008. "Transmission expansion in Argentina 5: The regional electricity forum of Buenos Aires province," Energy Economics, Elsevier, pages 1491-1526.
    5. Halkos, George E. & Tzeremes, Nickolaos G., 2013. "Carbon dioxide emissions and governance: A nonparametric analysis for the G-20," Energy Economics, Elsevier, pages 110-118.
    6. repec:spr:envpol:v:19:y:2017:i:2:d:10.1007_s10018-016-0162-5 is not listed on IDEAS
    7. Littlechild, Stephen C. & Ponzano, Eduardo A., 2008. "Transmission expansion in Argentina 5: The regional electricity forum of Buenos Aires province," Energy Economics, Elsevier, pages 1491-1526.
    8. Pollitt, M. J., 2011. "Lessons from the History of Independent System Operators in the Energy Sector, with applications to the Water Sector," Cambridge Working Papers in Economics 1153, Faculty of Economics, University of Cambridge.
    9. Brännlund Runar & Karimu Amin & Söderholm Patrik, 2017. "Convergence in carbon dioxide emissions and the role of growth and institutions: a parametric and non-parametric analysis," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(2), pages 359-390, April.
    10. Littlechild, Stephen C. & Skerk, Carlos J., 2008. "Transmission expansion in Argentina 2: The Fourth Line revisited," Energy Economics, Elsevier, pages 1385-1419.
    11. Littlechild, S.C. & Skerk, C.J., 2004. "Regulation of transmission expansion in Argentina Part I: State ownership, reform and the Fourth Line," Cambridge Working Papers in Economics 0464, Faculty of Economics, University of Cambridge.
    12. Pollitt, Michael G., 2012. "Lessons from the history of independent system operators in the energy sector," Energy Policy, Elsevier, vol. 47(C), pages 32-48.
    13. Francisco Silva Pinto & Rui Cunha Marques, 2016. "Tariff Suitability Framework for Water Supply Services," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(6), pages 2037-2053, April.

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