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Market-based Investment in Electricity Transmission Networks: Controllable Flow

  • Brunekreeft, G.
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    This paper discusses unregulated market-based electricity transmission investment by third parties as opposed to regulated investment by designated transmission system operators. The analysis is set against a European and Australian institutional background and focuses on interconnection of different systems. The paper explores four areas: economies of scale, market power, detrimental investment and risks. The analysis argues for restricting market-based investment to controllable flow (DC or FACTS) only. This is in line with what seems to take place in practice in Europe and Australia, it strikes a balance between pros and cons of market-based investment and draws a sharp line between regulated and unregulated investments.

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    File URL: http://www.econ.cam.ac.uk/electricity/publications/wp/ep29.pdf
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    Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0340.

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    Length: 23
    Date of creation: Sep 2003
    Date of revision:
    Handle: RePEc:cam:camdae:0340
    Note: CMI, IO
    Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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    1. Richard J. Gilbert., 1988. "Mobility Barriers and the Value of Incumbency," Economics Working Papers 8895, University of California at Berkeley.
    2. Bushnell, James B. & Stoft, Steven E., 1997. "Improving private incentives for electric grid investment," Resource and Energy Economics, Elsevier, vol. 19(1-2), pages 85-108, March.
    3. Chao, Hung-Po & Peck, Stephen, 1996. "A Market Mechanism for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 10(1), pages 25-59, July.
    4. Richard Gilbert & Neuhoff, K. & Newbery, D., 2002. "Allocating Transmission to Mitigate Market Power in Electricity Networks," Cambridge Working Papers in Economics 0225, Faculty of Economics, University of Cambridge.
    5. Paul L. Joskow, 2003. "The Difficult Transition to Competitive Electricity Markets in the U.S," Working Papers 0308, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    6. Bushnell, James B & Stoft, Steven E, 1996. "Electric Grid Investment under a Contract Network Regime," Journal of Regulatory Economics, Springer, vol. 10(1), pages 61-79, July.
    7. Joshua Gans & Stephen King, 2003. "Access Holidays for Network Infrastructure Investment," Monash Economics Working Papers archive-39, Monash University, Department of Economics.
    8. Hogan, William W., 2003. "Transmission Market Design," Working Paper Series rwp03-040, Harvard University, John F. Kennedy School of Government.
    9. Joskow, Paul & Tirole, Jean, 2004. "Merchant Transmission Investment," IDEI Working Papers 263, Institut d'Économie Industrielle (IDEI), Toulouse.
    10. Oren, Shmuel S. & Spiller, Pablo T. & Varaiya, Pravin & Wu, Felix, 1995. "Nodal prices and transmission rights: A critical appraisal," The Electricity Journal, Elsevier, vol. 8(3), pages 24-35, April.
    11. Bushnell, James & Stoft, Steven, 1996. "Grid investment: can a market do the job?," The Electricity Journal, Elsevier, vol. 9(1), pages 74-79.
    12. Joskow, Paul L & Tirole, Jean, 1999. "Transmission Rights and Market Power on Electric Power Networks I: Financial Rights," CEPR Discussion Papers 2093, C.E.P.R. Discussion Papers.
    13. Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-42, September.
    14. Kattuman, P.A. & Green, R.J. & Bialek, J.W., 2001. "A Tracing Method for Pricing Inter-Area Electricity Trades," Cambridge Working Papers in Economics 0107, Faculty of Economics, University of Cambridge.
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