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Generation adequacy and transmission interconnection in regional electricity markets

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  • Cepeda, Mauricio
  • Saguan, Marcelo
  • Finon, Dominique
  • Pignon, Virginie

Abstract

The power system capacity adequacy has public good features that cannot be entirely solved by electricity markets. Regulatory intervention is then necessary and established methods have been used to assess adequacy and help regulators to fix this market failure. In regional electricity markets, transmission interconnections play an important role in contributing to adequacy. However, the adequacy problem and related policy are typically considered at a national level. This paper presents a simple model to study how the interconnection capacity interacts with generation adequacy. First results indicate that increasing interconnection capacity between systems improves adequacy up to a certain level; further increases do not procure additional adequacy improvements. Furthermore, besides adequacy improvement, increasing transmission capacity under asymmetric adequacy criteria or national system characteristics could create several concerns about externalities. These results imply that regional coordination of national adequacy policies is essential to internalise adequacy of cross-border effects.

Suggested Citation

  • Cepeda, Mauricio & Saguan, Marcelo & Finon, Dominique & Pignon, Virginie, 2009. "Generation adequacy and transmission interconnection in regional electricity markets," Energy Policy, Elsevier, vol. 37(12), pages 5612-5622, December.
    • Handle: RePEc:eee:enepol:v:37:y:2009:i:12:p:5612-5622
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    1. Peter Cramton & Steven Stoft, 2006. "The Convergence of Market Designs for Adequate Generating Capacity," Papers of Peter Cramton 06mdfra, University of Maryland, Department of Economics - Peter Cramton, revised 2006.
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    Cited by:

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