Cost Recovery and the Efficient Development of the Grid
This chapter studies the inter-relationship between transmission pricing and investment in the grid. As with any good or service, if prices are low, demand will be high. In the case of electricity, this means that if the charges for using the transmission system are too low, generators and loads will be sited too far apart, and the amount of electricity that users wish to transmit between them will be high. The transmission planner will have the uncomfortable choice between investing in the system to facilitate these wishes, or operating a system that is too small in relation to the demands placed upon it, with the consequent implications for congestion and transmission losses.
KeywordsMarginal Cost Electricity Network Transmission Capacity Cost Recovery Spot Price
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