Rosellon, Juan and Weigt, Hannes (2008): A Dynamic Incentive Mechanism for Transmission Expansion in Electricity Networks – Theory, Modeling and Application.
Download (819kB) | Preview
This paper examines the Hogan-Rosellón-Vogelsang (2007) (HRV) incentive mechanism for transmission expansion, and tests it for different network topologies. This new mechanism is based upon redefining transmission output in terms of point-to-point transactions or financial transmission rights (FTRs) and applies Vogelsang’s (2001) incentive-regulation logic that proposes rebalancing the variable and fixed parts of a two-part tariff to promote efficient, long-term expansion. We analyze three main topics: first, the behavior of cost functions for distinct network topologies; second, the HRV regulatory approach (incorporated into an MPEC Problem and tested for a three-node network), and third an application to a simplified network. The results suggest that the mechanism is generally suited as an incentive tool for network extensions.
|Item Type:||MPRA Paper|
|Original Title:||A Dynamic Incentive Mechanism for Transmission Expansion in Electricity Networks – Theory, Modeling and Application|
|Keywords:||Electricity transmission expansion, incentive regulation, merchant investment,congestion management,Europe|
|Subjects:||L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation
L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L91 - Transportation: General
L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L94 - Electric Utilities
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q40 - General
|Depositing User:||Juan Rosellon|
|Date Deposited:||21. May 2010 19:26|
|Last Modified:||23. Apr 2015 05:44|
Bushnell, J. B., and S. E. Stoft (1997) “Improving Private Incentives for Electric Grid Investment,” Resource and Energy Economics 19, 85-108.
DENA (2005): dena-Netzstudie, Energiewirtschaftliche Planung für die Netzintegration von Windenergie in Deutschland an Land und Offshore bis zum Jahr 2020. Deutsche Energie-Agentur.
Department of Energy (2006): National electric transmission congestion study. August 2006.
Dyer, Jim (2003): U.S. Department of Energy Transmission Bottleneck Project Report. Consortium for Electric Reliability Technology Solutions (CERTS)
Ehrenmann, A., G. Oggioni, I. Rumiantseva and Y. Smeers (2006), “Introduction of CO2 Emission Certificates in a Simplified Model of the Benelux Electricity Network with Small and Large Consumers,” Working Paper WP-GE-13, Chair of Energy Economics and Public Sector Management (EE2), TU Dresden.
Grande, O. S., and I. Wangensteen (2000) “Alternative Models for Congestion Management and Pricing Impact on Network planning and Physical Operation,” CIGRE, Paris, Aug/Sept.
Hogan, W. (2002a) “Financial Transmission Right Incentives: Applications Beyond Hedging.” Presentation to HEPG Twenty-Eighth Plenary Sessions, May 31, http://www.ksg.harvard.edu/people/whogan.
Hogan, W. (2002b) “Financial Transmission Right Formulations,” Mimeo, JFK School of Government, Harvard Electricity Policy Group Harvard University, http://www.ksg.harvard.edu/people/whogan.
Hogan, W., J. Rosellón and I. Vogelsang (2007), “Toward a Combined Merchant-Regulatory Mechanism for Electricity Transmission Expansion,” Conference Proceedings, 9th IAEE European Energy Conference, Florence, Italy.
Joskow. P. (2005). The Difficult Transition to Competitive Electricity Markets in the U.S. In Electricity Deregulation: Choices and Challenges, J. Griffin and S. Puller, eds., University of Chicago Press, Chicago.
Joskow, P. and J. Tirole (2005) “Merchant Transmission Investment,” The Journal of Industrial Economics, volume 53, issue 2, Page 233, June.
Kristiansen, T. and J. Rosellón (2006) “A Merchant Mechanism for Electricity Transmission Expansion,” Journal of Regulatory Economics, vol.29, no. 2, pp. 167-193, March.
Laffont, J.J., and J. Tirole (1996) “Creating Competition Through Interconnections: Theory and Practice,” Journal of Regulatory Economics, 10: 227-256.
Léautier, T.-O. (2000) “Regulation of an Electric Power Transmission Company,” The Energy Journal, vol. 21, no. 4, pp. 61-92.
Leuthold, Florian, Hannes Weigt, and Christian von Hirschhausen (forthcoming): ELMOD - Electricity Model Using Nodal Prices. Dresden University of Technology, Chair of Energy Economics and Public Sector Management.
Neuhoff, Karsten, Julian Barquinb, Maroeska G. Bootsc, Andreas Ehrenmannd, Benjamin F. Hobbse, Fieke A.M. Rijkersf, and Miguel Va´zquez (2005): Network-constrained Cournot models of liberalized electricity markets: the devil is in the details. Energy Economics vol. 27 p. 495-525.
Pérez-Arriaga, J. I., F. J. Rubio and J. F. Puerta Gutiérrez, et al. (1995) “Marginal Pricing of Transmission Services: An Analysis of Cost Recovery,” IEEE Transactions on Power Systems, vol. 10, no. 1, February.
Ramírez, J. C. and J. Rosellón (2002) “Pricing Natural Gas Distribution in Mexico,” Energy Economics, vol. 24, no. 3, pp. 231-248.
Rosellón, J. (2007), “A Regulatory Mechanism for Electricity Transmission in Mexico,” Energy Policy, 35 (5): 3003-3014, May.
Schweppe, Fred C., Caramanis, Michael C., Tabors, Richard D., and Roger E. Bohn (1988): Spot Pricing Of Electricity. Boston, Kluwer.
Stigler, Heinz, and Christian Todem (2005): Optimization of the Austrian Electricity Sector (Control Zone of VERBUND APG) under the Constraints of Network Capacities by Nodal Pricing. In: Central European Journal of Operations Research, 13, 105-125.
Vogelsang, I. (2001), “Price Regulation for Independent Transmission Companies,” Journal of Regulatory Economics, vol. 20, no. 2, September.