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Designing electiricty transmission auctions: an introduction to the relevant literature

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  • Greve,T.
  • Pollitt, M. G.

Abstract

The UK has ambitious plans for exploiting offshore wind for electricity production in order to meet its challenging target under the EU Renewable Energy Directive. This could involve investing up to £20bn in transmission assets to bring electricity ashore. An investment of this magnitude calls for an efficient mechanism to determine which projects get financed and ensuring that only those projects that are selected can be delivered at least costs to consumers. The electricity regulator’s ongoing tender auctions are likely to work well for point-to-point transmission and for networks already built. However, it is still unclear what kinds of models could be considered for complex meshed offshore (and onshore) networks where licences are granted not only to own and operate, but also to build a transmission network. This paper provides an extensive survey on the current theory and experience of auctions. The main objective is to discuss the design of auctions for transmission assets in which bidding for packages of transmission assets is a possibility.

Suggested Citation

  • Greve,T. & Pollitt, M. G., 2012. "Designing electiricty transmission auctions: an introduction to the relevant literature," Cambridge Working Papers in Economics 1245, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1245
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    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1245.pdf
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    References listed on IDEAS

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    1. Paul Klemperer, 2010. "The Product-Mix Auction: A New Auction Design for Differentiated Goods," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 526-536, 04-05.
    2. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
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    1. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 169-189, Winter.

    More about this item

    Keywords

    Energy Transmission; Auction Design; Combinatorial Auctions; Package Bidding;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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