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Optimal Transmission Regulation in an Integrated Energy Market

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Abstract

The capacity of the transmission network determines the extent of integration of a multinational energy market. Cross-border externalities render coordination of network maintenance and investments across countries valuable. Is it then optimal to collect powers in the hands of a single regulator? Should a common system operator manage the entire network? I show that optimal network structure depends on (i ) how the common regulator would balance the interests of the different member states; (ii ) how the gains from market integration vary across countries; (iii ) network characteristics (substitutability versus complementarity); and (iv ) the social cost of operator rent.

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  • Tangerås, Thomas P., 2010. "Optimal Transmission Regulation in an Integrated Energy Market," Working Paper Series 838, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0838
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    2. Gorenstein Dedecca, João & Lumbreras, Sara & Ramos, Andrés & Hakvoort, Rudi A. & Herder, Paulien M., 2018. "Expansion planning of the North Sea offshore grid: Simulation of integrated governance constraints," Energy Economics, Elsevier, vol. 72(C), pages 376-392.
    3. Fridrik M. Baldursson & Ewa Lazarczyk & Marten Ovaere & Stef Proost, 2018. "Cross-Border Exchange and Sharing of Generation Reserve Capacity," The Energy Journal, , vol. 39(4), pages 57-84, July.
    4. Antonio Estache & Liam Wren-Lewis, 2012. "Supranational Infrastructure Regulation: Institutional Opportunities and Challenges," Working Papers ECARES ECARES 2012-025, ULB -- Universite Libre de Bruxelles.
    5. Pio Baake & Sebastian Schwenen & Christian von Hirschhausen, 2023. "Local Energy Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 71(3), pages 855-882, September.
    6. Sunila, Kanerva & Bergaentzlé, Claire & Martin, Bénédicte & Ekroos, Ari, 2019. "A supra-national TSO to enhance offshore wind power development in the Baltic Sea? A legal and regulatory analysis," Energy Policy, Elsevier, vol. 128(C), pages 775-782.
    7. Persson, Lars & Tangerås, Thomas, 2018. "Transmission Network Investment across National Borders: The Liberalized Nordic Electricity Market," Working Paper Series 1242, Research Institute of Industrial Economics.
    8. Gerbaulet, C. & Weber, A., 2018. "When regulators do not agree: Are merchant interconnectors an option? Insights from an analysis of options for network expansion in the Baltic Sea region," Energy Policy, Elsevier, vol. 117(C), pages 228-246.

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    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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