Power Flows: Transmission Lines, Allocative Efficiency, and Corporate Profits

Catherine Hausman

American Economic Review, 2025, vol. 115, issue 8, 2574-2615

Abstract: Accelerated investment in electricity transmission could reduce total costs and enhance renewable integration. I document static allocative inefficiencies induced by incomplete market integration in 2 major US markets; these have risen over time and totaled $2 billion in 2022. I also argue that estimating firm-level impacts is important, as incumbents may have the power to block new lines and other reforms. I show that 4 firms would have experienced a collective $1.3 billion drop in net revenues in 2022 had the market been integrated, all there are reports of some of these firms blocking transmission projects.

JEL-codes: D22 D24 L13 L94 Q42 Q48 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Power Flows: Transmission Lines, Allocative Efficiency, and Corporate Profits (2024)
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DOI: 10.1257/aer.20240276

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