Abstract
Among the many pending questions in the restructuring of electricity systems, the design of incentives to properly invest in the transmission network remains a particularly difficult one. The behaviour of the owner of network assets has been studied in different papers among which [Hogan (1992)], [Oren, Spiller, Varaiya and Wu (1995)], [Wu, Varaiya, Spiller and Oren (1996)] and Bushneil and Stoft (1996). These papers consider an electric system where generators do not have market power, electricity is traded at nodal prices hedged with Contracts for Differences (CFD) and transmission is organized around Transmission Congestion Contracts (TCC). Under these assumptions, Bushneil and Stoft (1996) show that the incentive to undertake detrimental network investments can be mitigated by TCC, but not to an extent sufficient to insure the optimal development of the grid.
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References
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Smeers, Y., Jing-Yuan, W. (1998). Transmission Contracts may also Hinder Detrimental Network Investments in Oligopolistic Electricity Markets. In: Zaccour, G. (eds) Deregulation of Electric Utilities. Topics in Regulatory Economics and Policy Series, vol 28. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-5729-6_14
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DOI: https://doi.org/10.1007/978-1-4615-5729-6_14
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