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Cost Recovery in Congested Electricity Networks

Author

Listed:
  • Pepermans, Guido

    (Hogeschool-Universiteit Brussel (HUB), Belgium)

  • Willems, Bert

    (CentER & Tilec, Tilburg University, Tilburg, The Netherlands)

Abstract

Large scale investments in European electricity networks are foreseen in the next decade. Pricing the network at marginal cost will not be sufficient to pay for those investments as the network is a natural monopoly. This paper derives numerically the socially optimal transmission prices for cost recovery, taking into account that electricity networks are often congested, while allowing for market power in generation. The model is illustrated with a Stackelberg game for the Belgian electricity market.

Suggested Citation

  • Pepermans, Guido & Willems, Bert, 2010. "Cost Recovery in Congested Electricity Networks," Working Papers 2010/22, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    • Handle: RePEc:hub:wpecon:201022
    as

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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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