Measuring the competitiveness benefits of a transmission investment policy: The case of the Alberta electricity market

Frank A. Wolak

Energy Policy, 2015, vol. 85, issue C, 426-444

Abstract: Transmission expansions can increase the extent of competition faced by wholesale electricity suppliers with the ability to exercise unilateral market power. This can cause them to submit offer curves closer to their marginal cost curves, which sets market-clearing prices closer to competitive benchmark price levels. These lower wholesale market-clearing prices are the competitiveness benefit consumers realize from the transmission expansion. This paper quantifies empirically the competitiveness benefits of a transmission expansion policy that causes strategic suppliers to expect no transmission congestion. Using hourly generation-unit level offer, output, market-clearing price and congestion data from the Alberta wholesale electricity market from January 1, 2009 to July 31, 2013, an upper and lower bound on the hourly consumer competitiveness benefits of this transmission policy is computed. Both of these competitiveness benefits measures are economically significant, which argues for including them in transmission planning processes for wholesale electricity markets to ensure that all transmission expansions with positive net benefits to electricity consumers are undertaken.

Keywords: Wholesale Electricity Markets; Valuing Transmission Expansions; Competitiveness Benefits; Alberta Electricity System Operator (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:85:y:2015:i:c:p:426-444

DOI: 10.1016/j.enpol.2015.05.024

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