EconPapers    
Economics at your fingertips  
 

A Dynamic Incentive Mechanism for Transmission Expansion in Electricity Networks: Theory, Modeling, and Application

Juan Rosellon () and Hannes Weigt

The Energy Journal, 2011, vol. Volume 32, issue Number 1, 119-148

Abstract: 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.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29) Track citations by RSS feed

Downloads: (external link)
http://www.iaee.org/en/publications/ejarticle.aspx?id=2410 (text/html)
Access to full text is restricted to IAEE members and subscribers. bers.

Related works:
Working Paper: A Dynamic Incentive Mechanism for Transmission Expansion in Electricity Networks: Theory, Modeling, and Application (2010) Downloads
Working Paper: A Dynamic Incentive Mechanism for Transmission Expansion in Electricity Networks–Theory, Modeling and Application (2008) Downloads
Working Paper: A Dynamic Incentive Mechanism for Transmission Expansion in Electricity Networks – Theory, Modeling and Application (2008) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aen:journl:2011v32-01-a05

Ordering information: This journal article can be ordered from
http://www.iaee.org/en/publications/ejsearch.aspx

Access Statistics for this article

More articles in The Energy Journal from International Association for Energy Economics Contact information at EDIRC.
Bibliographic data for series maintained by David Williams ().

 
Page updated 2020-09-26
Handle: RePEc:aen:journl:2011v32-01-a05