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The HRV Model for Optimal Expansion of Transmission Networks: An Application to the Ontario Electricity Grid

  • Juan Rosellón


    (Profesor-investigador, División de Economía, Centro de Investigación y Docencia Económicas (CIDE). México, D.F. y German Institute for Economic Research (DIW Berlín).)

  • Juan Tregear


    (estudiante de doctorado en Políticas Públicas, CIDE. México, D.F. Mexico.)

  • Eric Zenón


    (Investigador posdoctoral, Centro de Investigación en Energía (CIE), Universidad Nacional Autónoma de México (UNAM). México, D.F. Mexico.)

This paper presents the application of a mechanism that provides incentives to promote transmission network expansion in the electricity system of the Ontario province. Such mechanism combines a merchant approach with a regulatory approach. It is based on the rebalancing of a two-part tariff within the framework of a wholesale electricity market with nodal pricing. The expansion of the network is carried out through auctions of financial transmission rights for congested links. The mechanism is tested for a simplified transmission grid with ten interconnected zones, ten nodes, eleven lines and seventy eight generators in the Ontario province. The simulation is carried out for both peak and non-peak scenarios. Considering Laspeyres weights, the results show that prices converge to the marginal generation cost, the congestion rent decreases and the total social welfare increases.

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Article provided by in its journal Economia Mexicana NUEVA EPOCA.

Volume (Year): XXI (2012)
Issue (Month): 1 (January-June)
Pages: 133-173

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Handle: RePEc:emc:ecomex:v:21:y:2012:i:1:p:133-173
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