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Optimal transmission regulation of an integrated energy market

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  • Tangerås, Thomas P.

Abstract

The capacity of the transmission network determines the extent of integration of a multi-national energy market. Cross-border externalities render coordination of network capacity valuable. Is it then optimal to collect regulatory powers in the hands of a single regulator? Should a common system operator manage the entire network? I show that optimal network governance depends on (i) whether the centralized regulatory agency is able to balance the interests of the different countries; (ii) asymmetries across countries in the gains from market integration; (iii) network characteristics (substitutability versus complementarity); and (iv) the social cost of operator rent.

Suggested Citation

  • Tangerås, Thomas P., 2012. "Optimal transmission regulation of an integrated energy market," Energy Economics, Elsevier, vol. 34(5), pages 1644-1655.
    • Handle: RePEc:eee:eneeco:v:34:y:2012:i:5:p:1644-1655
    DOI: 10.1016/j.eneco.2012.01.007
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    2. Persson, Lars & Tangerås, Thomas, 2018. "Transmission Network Investment across National Borders: The Liberalized Nordic Electricity Market," Working Paper Series 1242, Research Institute of Industrial Economics.
    3. Gorenstein Dedecca, João & Lumbreras, Sara & Ramos, Andrés & Hakvoort, Rudi A. & Herder, Paulien M., 2018. "Expansion planning of the North Sea offshore grid: Simulation of integrated governance constraints," Energy Economics, Elsevier, vol. 72(C), pages 376-392.
    4. Gerbaulet, C. & Weber, A., 2018. "When regulators do not agree: Are merchant interconnectors an option? Insights from an analysis of options for network expansion in the Baltic Sea region," Energy Policy, Elsevier, vol. 117(C), pages 228-246.
    5. Fridrik M. Baldursson, Ewa Lazarczyk, Marten Ovaere, and Stef Proost, 2018. "Cross-Border Exchange and Sharing of Generation Reserve Capacity," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    6. Antonio Estache & Liam Wren-Lewis, 2012. "Supranational Infrastructure Regulation: Institutional Opportunities and Challenges," Working Papers ECARES ECARES 2012-025, ULB -- Universite Libre de Bruxelles.
    7. Pio Baake & Sebastian Schwenen & Christian von Hirschhausen, 2023. "Local Energy Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 71(3), pages 855-882, September.

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    Keywords

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    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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