Transmission constraints and strategic underinvestment in electric power generation

Thomas-Olivier Léautier

No 816, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

Abstract: This article is the first to examine electric power producers' investment decisions when competition is imperfect and the transmission grid congested. This analysis yields numerous original insights. First, congestion on the grid is transient, and may disappear when demand is highest. Second, transmission capacity increases have complex impacts on generation: they may increase, decrease, or have no impact on the marginal value of generation, and may have similar or opposite impacts on the marginal value of different technologies. Third, the true social value of transmission, including its impact on investment, may be significantly lower than is commonly assumed.

Keywords: electric power markets; imperfect competition; investment; transmission constraints (search for similar items in EconPapers)
JEL-codes: D61 L11 L94 (search for similar items in EconPapers)
Date: 2014-01
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind and nep-reg
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Working Paper: Transmission constraints and strategic underinvestment in electric power generation (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ide:wpaper:27856

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