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Abstract: Different Approaches Towards Electricity Transmission Expansion
Abstract
Different Approaches Towards Electricity Transmission Expansion
The Review of Network Economics
Vol. 2, Issue 3 - September 2003, pp 238-269
Author
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Juan Rosell�n
Centro de Investigaci�n y Docencia Econ�micas (CIDE) and Harvard University
E-mail: [email protected] |
Abstract
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There is an intense debate regarding the best way to attract investment for the long-term expansion of an electricity transmission network. We study three hypotheses: the long-term financial-transmission-right hypothesis; the incentive-regulation hypothesis; and the market-power hypothesis. The first approach derives optimal transmission expansion through auctions of long-term financial transmission rights by an independent system operator. The second provides a Transco with incentives to expand the network by making it face the entire social cost of congestion. The third approach defines optimal transmission expansion according to the strategic behavior of generators. This paper discusses the analytical and practical strengths and weaknesses of each approach.
Keywords: electricity, transmission, regulation, investment
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