Patterns of Transmission Investment
This paper examines a number of issues associated with alternative analytical approaches for evaluating investments in electricity transmission infrastructure, and institutional arrangements to govern network operation, maintenance and investment. The relationships between transmission investments driven by opportunities to reduce congestion and loss costs and transmission investment driven by traditional engineering reliability criteria are discussed. Reliability rules play a much more important role in transmission investment decisions today than do economic investment criteria as depicted in standard economic models of transmission networks. These models fail to capture key aspects of transmission operating and investment behaviour that are heavily influenced by uncertainty, contingency criteria and associated engineering reliability rules. I illustrate how the wholesale market and transmission investment frameworks have addressed these issues in England and Wales (E&W) since 1990 and in the PJM Regional Transmission Organization (RTO) in the U.S. since 2000.
References listed on IDEAS
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- Paul L. Joskow, 2006. "Incentive Regulation for Electricity Networks," CESifo DICE Report, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(2), pages 3-9, 07.
- Joskow, P.L., 2004.
"Transmission Policy in the United States,"
Cambridge Working Papers in Economics
0454, Faculty of Economics, University of Cambridge.
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