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Transmission investment in the Peruvian electricity market: Theory and applications

  • Ruiz, Erix
  • Rosellón, Juan

This research presents an application of the mechanism in Hogan et al. (2010) (HRV) to promote electricity transmission network expansion in the Peruvian electricity transmission system known as SEIN (Sistema Eléctrico Interconectado Nacional). The HRV mechanism combines the merchant and regulatory approaches to promote investment into transmission grids. This mechanism gives incentives for efficient investment in expansion of the network by rebalancing over time the fixed and variable charges of a two-part tariff in the framework of a wholesale electricity market with locational pricing. The expansion of the network is carried out through the sale of Financial Transmission Rights (FTRs) for the congested lines. The mechanism is applied for 103 nodes of the SEIN using detailed characteristics of generators, nodes and transmission lines. Under Laspeyres weights and linear cost of expansion of transmission capacity, it is shown that prices converge to lower price levels as a result of increased transmission capacity.

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Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 47 (2012)
Issue (Month): C ()
Pages: 238-245

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Handle: RePEc:eee:enepol:v:47:y:2012:i:c:p:238-245
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  1. Ingo Vogelsang, 2006. "Electricity Transmission Pricing and Performance-based Regulation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 97-126.
  2. Rosellon, Juan & Weigt, Hannes, 2008. "A Dynamic Incentive Mechanism for Transmission Expansion in Electricity Networks – Theory, Modeling and Application," MPRA Paper 22843, University Library of Munich, Germany.
  3. William Hogan & Juan Rosellón & Ingo Vogelsang, 2010. "Toward a combined merchant-regulatory mechanism for electricity transmission expansion," Journal of Regulatory Economics, Springer, vol. 38(2), pages 113-143, October.
  4. Juan Rosellón & Zdenka Mysliková & Eric Zenón, 2010. "Incentives for Transmission Investment in the PJM Electricity Market: FTRs or Regulation (or Both?)," Discussion Papers of DIW Berlin 1026, DIW Berlin, German Institute for Economic Research.
  5. Vogelsang, Ingo, 2001. "Price Regulation for Independent Transmission Companies," Journal of Regulatory Economics, Springer, vol. 20(2), pages 141-65, September.
  6. Tarjei Kristiansen & Juan Rosellón, 2006. "A Merchant Mechanism for Electricity Transmission Expansion," Journal of Regulatory Economics, Springer, vol. 29(2), pages 167-193, 03.
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