The Competitive Effects of Transmission Infrastructure in the Indian Electricity Market
India, seeking to reduce electricity shortages, set up a new power market, in which transmission constraints sharply limit trade between regions. I use confidential bidding data to estimate the costs of power supply and simulate market outcomes with more transmission capacity. I find that the returns to building transmission hinge on market conduct. Under a competitive model of supply, transmission investments roughly breakeven. Under a strategic model, the same transmission expansion increases market surplus by 19 percent, enough to justify the investment, because low-cost sellers increase supply in response to a more integrated grid.
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|Date of creation:||Jan 2017|
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- Jamasb, T. & Mota, R. & Newbery, D. & Pollitt, M., 2004.
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Cambridge Working Papers in Economics
0439, Faculty of Economics, University of Cambridge.
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- Kastl, Jakub, 2012. "On the properties of equilibria in private value divisible good auctions with constrained bidding," Journal of Mathematical Economics, Elsevier, vol. 48(6), pages 339-352.
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