Netting of capacity in interconnector auctions

Felix Hoeffler () and Tobias Wittmann ()
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Felix Hoeffler: Max Planck Institute for Research on Collective Goods, Bonn
Tobias Wittmann: Technische Universität, Berlin

No 2006_5, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: Scarce interconnector capacities are a severe obstacle to transregional competition and a unified market for electricity in the European Union. However, physically the interconnectors are rarely used up to capacity. This is due to the fact that the current allocation schemes make only limited use of the fact that currents in opposing directions cancel out. We propose a "netting" auction mechanism which makes use of this and in which even small transmission capacities can generate large competitive pressure in adjacent markets. Netting increases the usage of capacity and reduces the auctioneer's incentive to withhold capacity from the auction.

Keywords: Divisible good auctions; interconnector; electricity marktes; competition policy (search for similar items in EconPapers)
JEL-codes: D44 L94 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2006-03
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Citations: View citations in EconPapers (3)

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