A dynamic incentive mechanism for transmission expansion in electricity networks : theory, modeling and application
The Energy Journal, 2011, Vol. 32, No. 1, pp. 119-148[Florence School of Regulation], [Electricity]
ROSELLÓN, Juan, WEIGT, Hannes, A dynamic incentive mechanism for transmission expansion in electricity networks : theory, modeling and application, The Energy Journal, 2011, Vol. 32, No. 1, pp. 119-148[Florence School of Regulation], [Electricity] - https://hdl.handle.net/1814/19464
Retrieved from Cadmus, EUI Research Repository
We propose a price-cap mechanism for electricity-transmission expansion based on redefining transmission output in terms of financial transmission rights. Our mechanism applies the incentive-regulation logic of rebalancing a two-part tariff. First, we test this mechanism in a three-node network. We show that the mechanism intertemporally promotes an investment pattern that relieves congestion, increases welfare, augments the Transco´s profits, and induces convergence of prices to marginal costs. We then apply the mechanism to a grid of northwestern Europe and show a gradual convergence toward a common-price benchmark, an increase in total capacity, and convergence toward the welfare optimum.
Cadmus permanent link: https://hdl.handle.net/1814/19464
Series/Number: [Florence School of Regulation]; [Electricity]
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