 Valuation of physical transmission rights—An analysis of electricity cross-border capacities between Germany and the NetherlandsMagnus Wobben, Birgit Dieckmann and Oleg Reichmann Energy Policy, 2012, vol. 42, issue C, 174-180 Abstract: The purpose of this paper is to discuss market-coherent valuation of physical transmission rights for cross-border capacities between Germany and the Netherlands. Aiming at a fair valuation of these contracts, the most important stylized facts of electricity prices such as mean reversion, spikes and correlations of regional prices have to be considered. We present different approaches to the valuation of physical transmission rights and perform a quantitative analysis of the results. On the one hand various challenges of modeling regional price spreads are analyzed. On the other hand we indicate a structural undervaluation of physical transmission rights in all model constellations, i.e. market prices are below theoretical prices of PTR's flexibility. We discuss several reasons for this undervaluation and finally state that regulatory modifications have to be made to avoid missing incentives for the extension of cross-border capacities. Keywords: Physical transmission rights; Cross-border capacities; Spread options (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:42:y:2012:i:c:p:174-180 DOI: 10.1016/j.enpol.2011.11.063 Access Statistics for this article Energy Policy is currently edited by N. France More articles in Energy Policy from Elsevier |
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