The HRV Model for Optimal Expansion of Transmission Networks: An Application to the Ontario Electricity Grid

Juan Rosellon, Juan Tregear () and Eric Zenón ()
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Juan Tregear: estudiante de doctorado en Políticas Públicas, CIDE. México, D.F. Mexico.
Eric Zenón: Investigador posdoctoral, Centro de Investigación en Energía (CIE), Universidad Nacional Autónoma de México (UNAM). México, D.F. Mexico.

Economía Mexicana NUEVA ÉPOCA, 2012, vol. XXI, issue 1, 133-173

Abstract: This paper presents the application of a mechanism that provides incentives to promote transmission network expansion in the electricity system of the Ontario province. Such mechanism combines a merchant approach with a regulatory approach. It is based on the rebalancing of a two-part tariff within the framework of a wholesale electricity market with nodal pricing. The expansion of the network is carried out through auctions of financial transmission rights for congested links. The mechanism is tested for a simplified transmission grid with ten interconnected zones, ten nodes, eleven lines and seventy eight generators in the Ontario province. The simulation is carried out for both peak and non-peak scenarios. Considering Laspeyres weights, the results show that prices converge to the marginal generation cost, the congestion rent decreases and the total social welfare increases.

Keywords: electricity transmission; financial transmission rights (FTR); incentive regulation; loop flows; nodal prices. (search for similar items in EconPapers)
JEL-codes: L51 L91 L94 Q40 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:emc:ecomex:v:21:y:2012:i:1:p:133-173

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