National Transmission System Operators in an International Electricity Market

Henrik Horn and Thomas Tangerås ()

No 1394, Working Paper Series from Research Institute of Industrial Economics

Abstract: This paper develops a framework for analyzing the incentives of national transmission system operators (TSOs) to supply cross-border interconnection capacity in an international electricity market. Our results show that equilibrium transmission capacity is downward distorted, even in situations where full capacity utilization is inefficient. We derive a method for quantifying these distortions and propose a market design that uniquely implements efficient dispatch of electricity. In this design, the distribution of trade adjustment payments causes TSOs to internalize the full e¤ect of network congestion. The design would improve, for instance, on the current European market design.

Keywords: International electricity market; Market design; Market power; Network congestion (search for similar items in EconPapers)
JEL-codes: F12 F15 L43 L94 Q27 Q41 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2021-06-21
New Economics Papers: this item is included in nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: National Transmission System Operators in an International Electricity Market (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1394

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