Power System Transformation toward Renewables: An Evaluation of Regulatory Approaches for Network Expansion

Jonas Egerer, Juan Rosellon and Wolf-Peter Schill

EconStor Open Access Articles and Book Chapters, 2015, vol. 36, issue 4, 105-128

Abstract: We analyze various regulatory regimes for electricity transmission investment in the context of a power system transformation toward renewable energy. Distinctive developments of the generation mix are studied, assuming that a shift toward renewables may have temporary or permanent impacts on network congestion. We specifically analyze the relative performance of a combined merchant-regulatory price-cap mechanism, a cost-based rule, and a non-regulated approach in dynamic generation settings. We find that incentive regulation may perform better than cost-based regulation but only when appropriate weights are used. While quasi-ideal weights generally restore the beneficial properties that incentive regulatory mechanisms are well-known for, pure Laspeyres weights may either lead to over-investment or delayed investments as compared to the welfare-optimum benchmark. Laspeyres-Paasche weights, in turn, seem appropriate under permanently or temporarily increased network congestion. Thus, our analysis provides motivation for further research in order to characterize optimal regulation for transmission expansion in the context of renewable integration.

Keywords: Electricity transmission; Incentive regulation; Renewable integration; Laspeyres-Paasche weights; Ideal weights (search for similar items in EconPapers)
JEL-codes: L51 Q40 Q42 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/181036/1/E ... l_2015_Postprint.pdf (application/pdf)

Related works:
Journal Article: Power System Transformation toward Renewables: An Evaluation of Regulatory Approaches for Network Expansion (2015)
Journal Article: Power System Transformation toward Renewables: An Evaluation of Regulatory Approaches for Network Expansion (2015)
Working Paper: Power System Transformation towards Renewables: An Evaluation of Regulatory Approaches for Network Expansion (2013)
Working Paper: Power System Transformation towards Renewables: An Evaluation of Regulatory Approaches for Network Expansion (2013)
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:zbw:espost:121248

Access Statistics for this article

More articles in EconStor Open Access Articles and Book Chapters from ZBW - Leibniz Information Centre for Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().