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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.

Suggested Citation

  • Juan Rosellón & Juan Tregear & Eric Zenón, 2012. "The HRV Model for Optimal Expansion of Transmission Networks: An Application to the Ontario Electricity Grid," Economía Mexicana NUEVA ÉPOCA, , vol. 0(1), pages 133-173, January-J.
  • Handle: RePEc:emc:ecomex:v:21:y:2012:i:1:p:133-173

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    References listed on IDEAS

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    More about this item


    electricity transmission; financial transmission rights (FTR); incentive regulation; loop flows; nodal prices.;

    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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