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Measuring the competitiveness benefits of a transmission investment policy: The case of the Alberta electricity market

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  • Wolak, Frank A.

Abstract

Transmission expansions can increase the extent of competition faced by wholesale electricity suppliers with the ability to exercise unilateral market power. This can cause them to submit offer curves closer to their marginal cost curves, which sets market-clearing prices closer to competitive benchmark price levels. These lower wholesale market-clearing prices are the competitiveness benefit consumers realize from the transmission expansion. This paper quantifies empirically the competitiveness benefits of a transmission expansion policy that causes strategic suppliers to expect no transmission congestion. Using hourly generation-unit level offer, output, market-clearing price and congestion data from the Alberta wholesale electricity market from January 1, 2009 to July 31, 2013, an upper and lower bound on the hourly consumer competitiveness benefits of this transmission policy is computed. Both of these competitiveness benefits measures are economically significant, which argues for including them in transmission planning processes for wholesale electricity markets to ensure that all transmission expansions with positive net benefits to electricity consumers are undertaken.

Suggested Citation

  • Wolak, Frank A., 2015. "Measuring the competitiveness benefits of a transmission investment policy: The case of the Alberta electricity market," Energy Policy, Elsevier, vol. 85(C), pages 426-444.
    • Handle: RePEc:eee:enepol:v:85:y:2015:i:c:p:426-444
    DOI: 10.1016/j.enpol.2015.05.024
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    References listed on IDEAS

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    4. Brehm, Paul A. & Zhang, Yiyuan, 2021. "The efficiency and environmental impacts of market organization: Evidence from the Texas electricity market," Energy Economics, Elsevier, vol. 101(C).
    5. Brown, David P. & Eckert, Andrew, 2021. "Analyzing firm behavior in restructured electricity markets: Empirical challenges with a residual demand analysis," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    6. Erik P. Johnson & Juan Moreno-Cruz, 2020. "Congestion in the Electricity Transmission System Redistributes Pollution across Long Distances," CESifo Working Paper Series 8483, CESifo.
    7. LaRiviere, Jacob & Lyu, Xueying, 2022. "Transmission constraints, intermittent renewables and welfare," Journal of Environmental Economics and Management, Elsevier, vol. 112(C).
    8. Felix Höffler & Sebastian Kranz, 2015. "Using Forward Contracts to Reduce Regulatory Capture," Journal of Industrial Economics, Wiley Blackwell, vol. 63(4), pages 598-624, December.
    9. Schreiner, Lena & Madlener, Reinhard, 2021. "A pathway to green growth? Macroeconomic impacts of power grid infrastructure investments in Germany," Energy Policy, Elsevier, vol. 156(C).
    10. Clay, Karen & Hernandez-Cortes, Danae & Jha, Akshaya & Lewis, Joshua & Miller, Noah & Severnini, Edson, 2025. "The Social Lifecycle Impacts of Power Plant Siting in the Historical United States," IZA Discussion Papers 18052, IZA Network @ LISER.
    11. R. Andrew Butters & Daniel F. Spulber, 2020. "The Extent Of The Market And Integration Through Factor Markets: Evidence From Wholesale Electricity," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1076-1108, July.
    12. Javier Bustos-Salvagno & Fernando Fuentes H., 2017. "Electricity Interconnection in Chile: Prices versus Costs," Energies, MDPI, vol. 10(9), pages 1-17, September.
    13. Dorsey-Palmateer, Reid, 2020. "Transmission costs and the value of wind generation for the CREZ project," Energy Policy, Elsevier, vol. 138(C).
    14. Karen Clay & Danae Hernandez-Cortes & Akshaya Jha & Joshua Lewis & Noah Miller & Edson Severnini, 2025. "The Social Life Cycle Impacts of Power Plant Siting in the Historical United States," NBER Chapters, in: Environmental and Energy Policy and the Economy, volume 7, pages 65-96, National Bureau of Economic Research, Inc.
    15. D’Agosti, Natalia, 2025. "The effects of renewable electricity supply when renewables dominate: Evidence from Uruguay," Energy Economics, Elsevier, vol. 144(C).
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