We can think about physical trade in electricity at two levels of aggregation: between countries and between regions within a country. Starting with the latter level the models with individual plants in Chapter 4 are examples. However, the trade flows were not specified there. This is not so conveniently done operating without an explicit transmission system. A transmission system is introduced in Chapter 7. In order to study trade between two countries a single interconnector only will be assumed. The aggregate treatment of the hydropower sector can then be maintained and the analysis can be conducted without specifying transmission and still bring out some main points.
KeywordsEquilibrium Price Demand Curve Shadow Price Import Price Export Price
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