Merchant Interconnector Projects by Generators in the EU: Effects on profitability and allocation of capacity

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dc.contributor.author VAN KOTEN, Silvester
dc.date.accessioned 2012-03-01T15:27:48Z
dc.date.available 2012-03-01T15:27:48Z
dc.date.issued 2012
dc.identifier.citation Energy Policy, 2012, 41, 748–758 en
dc.identifier.issn 1873-6777
dc.identifier.issn 0301-4215
dc.identifier.uri http://hdl.handle.net/1814/20797
dc.description.abstract When building a cross-border transmission line (a so-called interconnector) as a for-profit (merchant) project, where the regulator has required that capacity allocation be done non-discriminatorily by explicit auction, the identity of the investor can affect the profitability of the interconnector project and, once operational, the resulting allocation of its capacity. Specifically, when the investor is a generator (hereafter the integrated generator) who also can use the interconnector to export its electricity to a distant location, then, once operational, the integrated generator will bid more aggressively in the allocation auctions to increase the auction revenue and thus its profits. As a result, the integrated generator is more likely to win the auction and the capacity is sold for a higher price. This lowers the allocative efficiency of the auction, but it increases the expected ex-ante profitability of the merchant interconnector project. Unaffiliated, independent generators, however, are less likely to win the auction and, in any case, pay a higher price, which dramatically lowers their revenues from exporting electricity over this interconnector. en
dc.language.iso en en
dc.title Merchant Interconnector Projects by Generators in the EU: Effects on profitability and allocation of capacity en
dc.type Article en
dc.identifier.doi 10.1016/j.enpol.2011.11.042


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