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The Diversity of Design of TSOs

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  • Vincent Rious
  • Jean-Michel Glachant
  • Yannick Perez
  • Philippe Dessante

Abstract

It is puzzling today to explain diversity and imperfection of actual transmission monopoly designs in competitive electricity markets. We argue that transmission monopoly in competitive electricity markets has to be analysed within a Wilson (2002) modular framework. Applied to the management of electricity flows, at least three modules make the core of transmission design: 1° the short run management of network externalities; 2° the long run management of network investment; and 3° the coordination of neighboring Transmission System Operators for cross border trade. In order to tackle this diversity of designs of TSOs, we show that for each of these modules, three different basic ways of managing them are possible. Among the identified twenty seven options of organisation, we define an Ideal TSO. Second, we demonstrate that 1°monopoly design differs from this Ideal TSO and cannot handle these three modules irrespective of the “institutional” definition and allocation of property rights on transmission; while 2°definition and allocation of property rights on transmission cannot ignore the existing electrical industry and transmission network structure: they have to complement each other to be efficient. Some conclusions for regulatory issues of transmission systems operators are derived from this analysis of network monopoly organisation.

Suggested Citation

  • Vincent Rious & Jean-Michel Glachant & Yannick Perez & Philippe Dessante, 2008. "The Diversity of Design of TSOs," Working Papers 0805, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  • Handle: RePEc:mee:wpaper:0805
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:rensus:v:81:y:2018:i:p1:p:605-614 is not listed on IDEAS
    2. Cédric Clastres & Catherine Locatelli, 2012. "European Union energy security: the challenges of liberalisation in a risk-prone international environment Society," Post-Print halshs-00787123, HAL.
    3. Miguel Vazquez & Michelle Hallack, 2013. "Interaction between gas and electricity market-based trading in the short run," RSCAS Working Papers 2013/42, European University Institute.
    4. Vazquez, Miguel & Hallack, Michelle, 2015. "Interaction between gas and power market designs," Utilities Policy, Elsevier, vol. 33(C), pages 23-33.
    5. Gert Brunekreeft, 2011. "Vertical Relations and Energy Networks: Selected Issues," Chapters,in: Competition, Contracts and Electricity Markets, chapter 5 Edward Elgar Publishing.
    6. Jean-Michel Glachant, 2012. "Regulating Networks in the New Economy," Review of Economics and Institutions, Università di Perugia, vol. 3(1).
    7. Keyaerts, Nico & Hallack, Michelle & Glachant, Jean-Michel & D'haeseleer, William, 2011. "Gas market distorting effects of imbalanced gas balancing rules: Inefficient regulation of pipeline flexibility," Energy Policy, Elsevier, vol. 39(2), pages 865-876, February.
    8. Tangerås, Thomas P., 2012. "Optimal transmission regulation of an integrated energy market," Energy Economics, Elsevier, vol. 34(5), pages 1644-1655.
    9. Yannick Perez & Marc Petit, 2016. "Transmission System Operator Regulation for Electric Vehicle Fleets: A Survey of the Issues," Post-Print hal-01424647, HAL.
    10. J-M- Glachant & H. Khalfallah & Y. Perez & V. Rious & M. Saguan, 2013. "Implementing Incentive Regulation and Regulatory Alignment with Resource Bounded Regulators," Competition and Regulation in Network Industries, Intersentia, vol. 14(3), pages 265-291, September.
    11. Hiroux, C. & Saguan, M., 2010. "Large-scale wind power in European electricity markets: Time for revisiting support schemes and market designs?," Energy Policy, Elsevier, vol. 38(7), pages 3135-3145, July.
    12. Mustafa Durakoglu, S., 2011. "Political institutions of electricity regulation: The case of Turkey," Energy Policy, Elsevier, vol. 39(9), pages 5578-5587, September.
    13. Codani, Paul & Perez, Yannick & Petit, Marc, 2016. "Financial shortfall for electric vehicles: Economic impacts of Transmission System Operators market designs," Energy, Elsevier, vol. 113(C), pages 422-431.
    14. Dubois, Ute, 2009. "Adaptability of competitive electricity reforms a modular analysis," Energy Policy, Elsevier, vol. 37(4), pages 1213-1221, April.
    15. Borne, Olivier & Korte, Klaas & Perez, Yannick & Petit, Marc & Purkus, Alexandra, 2018. "Barriers to entry in frequency-regulation services markets: Review of the status quo and options for improvements," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P1), pages 605-614.
    16. Jean-Michel Glachant & Yannick Perez, 2011. "The Liberalization of Electricity Markets," Chapters,in: International Handbook of Network Industries, chapter 10 Edward Elgar Publishing.
    17. Nardi, Paolo, 2012. "Transmission network unbundling and grid investments: Evidence from the UCTE countries," Utilities Policy, Elsevier, vol. 23(C), pages 50-58.
    18. Jean-Michel Glachant & Haikel Khalfallah & Yannick Perez & Vincent Rious & Marcelo Saguan, 2013. "Implementing incentive regulation through an alignment with resource bounded regulators," Post-Print halshs-00767872, HAL.

    More about this item

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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