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Optimal expansion of the power transmission grid: why not?

Author

Listed:
  • Thomas-Olivier Léautier

    (CRM - Centre de Recherche en Management - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - IAE - Institut d'Administration des Entreprises - Toulouse - CNRS - Centre National de la Recherche Scientifique)

  • Véronique Thelen

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

Abstract

While the transmission grid is essential to the operation of well-functioning electric power markets, it appears to be lacking in many regions. This article investigates the causes of this situation, that reviews the main prescriptions of the academic literature, and compares them with experience from sixteen jurisdictions that have restructured their power industry in the last twenty years. We find that vertical separation may be necessary, but is not sufficient to induce grid expansion: a well-designed incentive scheme is also required. When both vertical separation and specific incentives are present, significant congestion reduction is observed.

Suggested Citation

  • Thomas-Olivier Léautier & Véronique Thelen, 2009. "Optimal expansion of the power transmission grid: why not?," Post-Print hal-02402972, HAL.
    • Handle: RePEc:hal:journl:hal-02402972
    DOI: 10.1007/s11149-008-9086-8
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    Citations

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    Cited by:

    1. Biggar, Darryl R. & Hesamzadeh, Mohammad Reza, 2022. "An integrated theory of dispatch and hedging in wholesale electric power markets," Energy Economics, Elsevier, vol. 112(C).
    2. Espinosa, Rubi & Rosellon, Juan, 2017. "Optimal Transmission Tariff Regulation for the Southern Baja-Californian Electricity Network System," MPRA Paper 98092, University Library of Munich, Germany.
    3. Giulietti, Monica & Le Coq, Chloé & Willems, Bert & Anaya, Karim, 2019. "Smart Consumers in the Internet of Energy : Flexibility Markets & Services from Distributed Energy Resources," Other publications TiSEM 2edb43b5-bbd6-487d-abdf-7, Tilburg University, School of Economics and Management.
    4. Jacques Pelkmans & Lionel Kapff, 2010. "Interconnector Investment for a Well-functioning Internal Market. What EU regime of regulatory incentives?," Bruges European Economic Research Papers 18, European Economic Studies Department, College of Europe.
    5. Wolf-Peter Schill & Juan Rosellón & Jonas Egerer, 2011. "Regulated Expansion of Electricity Transmission Networks: The Effects of Fluctuating Demand and Wind Generation," Discussion Papers of DIW Berlin 1109, DIW Berlin, German Institute for Economic Research.
    6. Stephen Littlechild, 2012. "Merchant and regulated transmission: theory, evidence and policy," Journal of Regulatory Economics, Springer, vol. 42(3), pages 308-335, December.
    7. Zenón, Eric & Rosellón, Juan, 2017. "Optimal transmission planning under the Mexican new electricity market," Energy Policy, Elsevier, vol. 104(C), pages 349-360.
    8. Felix Höffler & Achim Wambach, 2013. "Investment coordination in network industries: the case of electricity grid and electricity generation," Journal of Regulatory Economics, Springer, vol. 44(3), pages 287-307, December.
    9. Huppmann, Daniel & Egerer, Jonas, 2015. "National-strategic investment in European power transmission capacity," European Journal of Operational Research, Elsevier, vol. 247(1), pages 191-203.
    10. Nardi, Paolo, 2012. "Transmission network unbundling and grid investments: Evidence from the UCTE countries," Utilities Policy, Elsevier, vol. 23(C), pages 50-58.
    11. Höffler, Felix & Wambach, Achim, 2013. "Investment Coordination in Network Industries: The Case of Electricity Grid and Electricity," EWI Working Papers 2013-12, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    12. Bert Willems & Juulia Zhou, 2020. "The Clean Energy Package and Demand Response: Setting Correct Incentives," Energies, MDPI, vol. 13(21), pages 1-19, October.
    13. Groppi, Angelamaria & Fumagalli, Elena, 2014. "Network expansion by a proactive transmission system operator: A case study," Energy Policy, Elsevier, vol. 69(C), pages 610-623.
    14. de Nooij, Michiel, 2011. "Social cost-benefit analysis of electricity interconnector investment: A critical appraisal," Energy Policy, Elsevier, vol. 39(6), pages 3096-3105, June.
    15. Anette Boom, 2012. "Vertikale Entflechtung in der Stromwirtschaft," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 81(1), pages 57-71.
    16. Chao, Hung-po & Wilson, Robert, 2020. "Coordination of electricity transmission and generation investments," Energy Economics, Elsevier, vol. 86(C).
    17. Claudia Kemfert & Friedrich Kunz & Juan Rosellón, 2015. "A Welfare Analysis of the Electricity Transmission Regulatory Regime in Germany," Discussion Papers of DIW Berlin 1492, DIW Berlin, German Institute for Economic Research.
    18. Michiel de Nooij, 2010. "Social Cost Benefit Analysis of Interconnector Investment: A Critical Appraisal," Bremen Energy Working Papers 0002, Bremen Energy Research.
    19. Schill, Wolf-Peter & Egerer, Jonas & Rosellón, Juan, 2015. "Testing Regulatory Regimes for Power Transmission Expansion with Fluctuating Demand and Wind Generation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 47(1), pages 1-28.
    20. Peyman Khezr & Flavio M. Menezes, 2019. "Funding natural monopoly infrastructure expansion: auctions versus regulated uniform access prices," Journal of Regulatory Economics, Springer, vol. 55(2), pages 193-213, April.
    21. Ross Baldick, 2018. "Incentive properties of coincident peak pricing," Journal of Regulatory Economics, Springer, vol. 54(2), pages 165-194, October.

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