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Netting of Capacity in Interconnector Auctions

Author

Listed:
  • Felix Höffler
  • Tobias Wittmann

Abstract

Scarce interconnector capacities are a severe obstacle to transregional competition and a unified market for electricity in the European Union. However, physically the interconnectors are rarely used up to capacity. This is due to the fact that the current allocation schemes make only limited use of the fact that currents in opposing directions cancel out. We propose a “netting†auction mechanism which makes use of this and in which even small transmission capacities can generate large competitive pressure in adjacent markets. Netting increases the usage of capacity and reduces the auctioneer’s incentive to withhold capacity from the auction.

Suggested Citation

  • Felix Höffler & Tobias Wittmann, 2007. "Netting of Capacity in Interconnector Auctions," The Energy Journal, , vol. 28(1), pages 113-114, January.
    • Handle: RePEc:sae:enejou:v:28:y:2007:i:1:p:113-114
    DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No1-6
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    References listed on IDEAS

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    1. Grossman, Sanford J, 1981. "Nash Equilibrium and the Industrial Organization of Markets with Large Fixed Costs," Econometrica, Econometric Society, vol. 49(5), pages 1149-1172, September.
    2. SMEERS, Yves, 2003. "Market incompleteness in regional electricity transmission. Part I: the forward market," LIDAM Reprints CORE 1632, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. SMEERS, Yves, 2003. "Market incompleteness in regional electricity transmission. Part II: the forward and real time markets," LIDAM Reprints CORE 1633, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

    1. Horn, Henrik & Tangerås, Thomas, 2025. "Local network operators in an integrated electricity market," Energy Economics, Elsevier, vol. 150(C).

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