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Merchant electricity transmission expansion: A European case study

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  • Kristiansen, T.
  • Rosellón, J.

Abstract

We apply a merchant transmission model to the trilateral market coupling (TLC) arrangement among the Netherlands, Belgium and France as an example, and note that it could further be applied to other market splitting or coupling of Europe’s different national power markets. In this merchant framework the system operator allocates financial transmission rights (FTRs) to investors in transmission expansion based upon their preferences, and revenue adequacy. The independent system operator (ISO) preserves some proxy FTRs to manage potential negative externalities that may result from expansion projects. This scheme could help European market coupling arrangements attract additional investment.

Suggested Citation

  • Kristiansen, T. & Rosellón, J., 2010. "Merchant electricity transmission expansion: A European case study," Energy, Elsevier, vol. 35(10), pages 4107-4115.
    • Handle: RePEc:eee:energy:v:35:y:2010:i:10:p:4107-4115
    DOI: 10.1016/j.energy.2010.06.025
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    Cited by:

    1. Hemmati, Reza & Hooshmand, Rahmat-Allah & Khodabakhshian, Amin, 2013. "State-of-the-art of transmission expansion planning: Comprehensive review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 23(C), pages 312-319.
    2. Clemens Gerbaulet & Alexander Weber, 2014. "Is There Still a Case for Merchant Interconnectors?: Insights from an Analysis of Welfare and Distributional Aspects of Options for Network Expansion in the Baltic Sea Region," Discussion Papers of DIW Berlin 1404, DIW Berlin, German Institute for Economic Research.
    3. repec:era:chaptr:2013-rpr-29-07 is not listed on IDEAS
    4. Wolf-Peter Schill & Juan Rosellón & Jonas Egerer, 2011. "Regulated Expansion of Electricity Transmission Networks: The Effects of Fluctuating Demand and Wind Generation," Discussion Papers of DIW Berlin 1109, DIW Berlin, German Institute for Economic Research.
    5. Zenon, Eric & Rosellon, Juan, 2010. "Expansión de las Redes de Transmisión Eléctrica en Norteamérica: Teoría y Aplicaciones [The Expansion of Electricity Networks in North America: Theory and Applications]," MPRA Paper 26470, University Library of Munich, Germany.
    6. Wu, Zhongqun & Zheng, Ruijin, 2022. "Research on the impact of financial transmission rights on transmission expansion: A system dynamics model," Energy, Elsevier, vol. 239(PA).
    7. Tom Brijs & Daniel Huppmann & Sauleh Siddiqui & Ronnie Belmans, 2016. "Auction-Based Allocation of Shared Electricity Storage Resources through Physical Storage Rights," Discussion Papers of DIW Berlin 1566, DIW Berlin, German Institute for Economic Research.
    8. Michael G. Pollitt, 2011. "Lessons from the History of Independent System Operators in the Energy Sector, with applications to the Water Sector," Working Papers EPRG 1125, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    9. 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.
    10. Ochoa, Camila & van Ackere, Ann, 2015. "Winners and losers of market coupling," Energy, Elsevier, vol. 80(C), pages 522-534.
    11. Torriti, Jacopo, 2014. "Privatisation and cross-border electricity trade: From internal market to European Supergrid?," Energy, Elsevier, vol. 77(C), pages 635-640.
    12. Espinosa, Rubi & Rosellon, Juan, 2017. "Optimal Transmission Tariff Regulation for the Southern Baja-Californian Electricity Network System," MPRA Paper 98092, University Library of Munich, Germany.
    13. Zheng, Kedi & Chen, Huiyao & Wang, Yi & Chen, Qixin, 2022. "Data-driven financial transmission right scenario generation and speculation," Energy, Elsevier, vol. 238(PC).
    14. Hagspiel, S. & Jägemann, C. & Lindenberger, D. & Brown, T. & Cherevatskiy, S. & Tröster, E., 2014. "Cost-optimal power system extension under flow-based market coupling," Energy, Elsevier, vol. 66(C), pages 654-666.
    15. 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.
    16. Chamorro, José M. & Abadie, Luis M. & de Neufville, Richard & Ilić, Marija, 2012. "Market-based valuation of transmission network expansion. A heuristic application in GB," Energy, Elsevier, vol. 44(1), pages 302-320.
    17. Li, Yanfei & Chang, Youngho, 2015. "Infrastructure investments for power trade and transmission in ASEAN+2: Costs, benefits, long-term contracts and prioritized developments," Energy Economics, Elsevier, vol. 51(C), pages 484-492.
    18. Rosellon, Juan & Tregear, Juan & Zenon, Eric, 2010. "El modelo HRV para expansión óptima de redes de transmisión: una aplicación a la red eléctrica de Ontario [The HRV Model for the Optimal Expansion of Transmission Networks: an Application to the On," MPRA Paper 26471, University Library of Munich, Germany.
    19. Zakeri, Behnam & Virasjoki, Vilma & Syri, Sanna & Connolly, David & Mathiesen, Brian V. & Welsch, Manuel, 2016. "Impact of Germany's energy transition on the Nordic power market – A market-based multi-region energy system model," Energy, Elsevier, vol. 115(P3), pages 1640-1662.
    20. Yanfei LI & Youngho CHANG, 2014. "Infrastructutre Investments for Power Trade and Transmission in ASEAN+2: Costs, Benefits, Long-Term Contracts, and Prioritised Development," Working Papers DP-2014-21, Economic Research Institute for ASEAN and East Asia (ERIA).
    21. Schill, Wolf-Peter & Egerer, Jonas & Rosellón, Juan, 2015. "Testing Regulatory Regimes for Power Transmission Expansion with Fluctuating Demand and Wind Generation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 47(1), pages 1-28.

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    More about this item

    Keywords

    Transmission expansion; Trilateral market coupling; Europe; Financial transmission rights; Congestion management;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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