Introduction of Nodal Pricing into the new Mexican Electricity Market through FTR Allocations

Friedrich Kunz, Juan Rosellón, and Claudia Kemfert
Authors registered in the RePEc Author Service: Friedrich Kunz, Juan Rosellon and Claudia Kemfert

The Energy Journal, 2017, vol. Volume 38, issue KAPSARC Special Issue

Abstract: The change from a subsidized zonal pricing system to a full nodal pricing regime in the new Mexican electricity market could improve the efficiency of electricity system operation. However, resulting price modifications might also swing surplus across producers and consumers. In this paper, we calculate nodal prices for the Mexican power system and further analyze how allocations of financial transmission rights (FTRs) can be used to mitigate resulting distributional effects. The share of FTRs to be allocated to different generation plants and loads is studied as a second step of an electricity tariff subsidy reform agenda that includes, as a first step, the change to nodal pricing and, as a third step, the reformulation of actual regressive subsidies in a progressive way. We test our model in a realistic nodal price setting, based on an hourly modeling of the Mexican power system.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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