Cost Recovery in Congested Electricity Networks

Guido Pepermans () and Bert Willems

No 2010/22, Working Papers from Hogeschool-Universiteit Brussel, Faculteit Economie en Management

Abstract: Large scale investments in European electricity networks are foreseen in the next decade. Pricing the network at marginal cost will not be sufficient to pay for those investments as the network is a natural monopoly. This paper derives numerically the socially optimal transmission prices for cost recovery, taking into account that electricity networks are often congested, while allowing for market power in generation. The model is illustrated with a Stackelberg game for the Belgian electricity market.

Keywords: Cost Recovery; Energy Networks; Market Power; Investments (search for similar items in EconPapers)
JEL-codes: D43 L94 (search for similar items in EconPapers)
Pages: 22 page
Date: 2010-06
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