IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v96y2016icp260-273.html
   My bibliography  Save this article

Transmission capacities and competition in Western European electricity market

Author

Listed:
  • Spiridonova, Olga

Abstract

The integration of national electricity markets into a single European one is expected to reduce the ability of dominant players to exercise market power. This paper investigates whether or not existing transmission capacities of cross-border interconnectors are sufficient to achieve this result and create vigorous competition in the market. A model with two decision levels is used. On the first level profit maximizing generators play Cournot game against each other. On the last level the system operator clears the market and determines flows in the network to maximize social welfare subject to a set of physical constraints. As each strategic generator anticipates her impact on equilibrium prices and congestion in the system, her optimization problem is subject to equilibrium constraints from the system operator's problem.

Suggested Citation

  • Spiridonova, Olga, 2016. "Transmission capacities and competition in Western European electricity market," Energy Policy, Elsevier, vol. 96(C), pages 260-273.
    • Handle: RePEc:eee:enepol:v:96:y:2016:i:c:p:260-273
    DOI: 10.1016/j.enpol.2016.06.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421516302889
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2016.06.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Steven A. Gabriel & Antonio J. Conejo & J. David Fuller & Benjamin F. Hobbs & Carlos Ruiz, 2013. "Complementarity Modeling in Energy Markets," International Series in Operations Research and Management Science, Springer, edition 127, number 978-1-4419-6123-5.
    2. Woo, Chi-Keung & Lloyd, Debra & Tishler, Asher, 2003. "Electricity market reform failures: UK, Norway, Alberta and California," Energy Policy, Elsevier, vol. 31(11), pages 1103-1115, September.
    3. Hu, X. & Ralph, D. & Ralph, E.K. & Bardsley, P. & Ferris, M.C., 2004. "Electricity Generation with Looped Transmission Networks: Bidding to an ISO," Cambridge Working Papers in Economics 0470, Faculty of Economics, University of Cambridge.
    4. Enzo Sauma & Shmuel Oren, 2006. "Proactive planning and valuation of transmission investments in restructured electricity markets," Journal of Regulatory Economics, Springer, vol. 30(3), pages 358-387, November.
    5. Pozo, David & Contreras, Javier & Sauma, Enzo, 2013. "If you build it, he will come: Anticipative power transmission planning," Energy Economics, Elsevier, vol. 36(C), pages 135-146.
    6. Green, Richard J & Newbery, David M, 1992. "Competition in the British Electricity Spot Market," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 929-953, October.
    7. Severin Borenstein & James. Bushnell & Steven Stoft, 2000. "The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 294-325, Summer.
    8. Gabriel, Steven A. & Leuthold, Florian U., 2010. "Solving discretely-constrained MPEC problems with applications in electric power markets," Energy Economics, Elsevier, vol. 32(1), pages 3-14, January.
    9. David M. Newbery & Michael G. Pollitt, 1997. "The Restructuring and Privatization of the U.K. Electricity Supply-Was It Worth It?," World Bank Publications - Reports 11572, The World Bank Group.
    10. Mari Makkonen, Mats Nilsson and Satu Viljainen, 2015. "All quiet on the western front? Transmission capacity development in the Nordic electricity market," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    11. Andreas Ehrenmann & Karsten Neuhoff, 2009. "A Comparison of Electricity Market Designs in Networks," Operations Research, INFORMS, vol. 57(2), pages 274-286, April.
    12. S. Siddiqui & S. Gabriel, 2013. "An SOS1-Based Approach for Solving MPECs with a Natural Gas Market Application," Networks and Spatial Economics, Springer, vol. 13(2), pages 205-227, June.
    13. Fürsch, Michaela & Hagspiel, Simeon & Jägemann, Cosima & Nagl, Stephan & Lindenberger, Dietmar & Tröster, Eckehard, 2013. "The role of grid extensions in a cost-efficient transformation of the European electricity system until 2050," Applied Energy, Elsevier, vol. 104(C), pages 642-652.
    14. Ventosa, Mariano & Baillo, Alvaro & Ramos, Andres & Rivier, Michel, 2005. "Electricity market modeling trends," Energy Policy, Elsevier, vol. 33(7), pages 897-913, May.
    15. Neuhoff, Karsten & Barquin, Julian & Boots, Maroeska G. & Ehrenmann, Andreas & Hobbs, Benjamin F. & Rijkers, Fieke A.M. & Vazquez, Miguel, 2005. "Network-constrained Cournot models of liberalized electricity markets: the devil is in the details," Energy Economics, Elsevier, vol. 27(3), pages 495-525, May.
    16. Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
    17. Leuthold, Florian & Weigt, Hannes & von Hirschhausen, Christian, 2008. "Efficient pricing for European electricity networks - The theory of nodal pricing applied to feeding-in wind in Germany," Utilities Policy, Elsevier, vol. 16(4), pages 284-291, December.
    18. Blaise Allaz & Jean-Luc Vila, 1993. "Cournot Competition, Forward Markets and Efficiency," Post-Print hal-00511806, HAL.
    19. William W. Hogan, 1997. "A Market Power Model with Strategic Interaction in Electricity Networks," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 107-141.
    20. Cardell, Judith B. & Hitt, Carrie Cullen & Hogan, William W., 1997. "Market power and strategic interaction in electricity networks," Resource and Energy Economics, Elsevier, vol. 19(1-2), pages 109-137, March.
    21. RUIZ, Carlos & CONEJO, Antonio J. & SMEERS, Yves, 2012. "Equilibria in an oligopolistic electricity pool with stepwise offer curves," LIDAM Reprints CORE 2395, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    22. Xinmin Hu & Daniel Ralph, 2007. "Using EPECs to Model Bilevel Games in Restructured Electricity Markets with Locational Prices," Operations Research, INFORMS, vol. 55(5), pages 809-827, October.
    23. Tanaka, Makoto, 2009. "Transmission-constrained oligopoly in the Japanese electricity market," Energy Economics, Elsevier, vol. 31(5), pages 690-701, September.
    24. Zachmann, Georg, 2008. "Electricity wholesale market prices in Europe: Convergence?," Energy Economics, Elsevier, vol. 30(4), pages 1659-1671, July.
    25. Enzo Sauma & Shmuel Oren, 2006. "Proactive planning and valuation of transmission investments in restructured electricity markets," Journal of Regulatory Economics, Springer, vol. 30(3), pages 261-290, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Qu, Chunzi & Bang, Rasmus Noss, 2024. "European Grid Development Modeling and Analysis: Established Frameworks, Research Trends, and Future Opportunities," Discussion Papers 2024/11, Norwegian School of Economics, Department of Business and Management Science.
    2. Saez, Yago & Mochon, Asuncion & Corona, Luis & Isasi, Pedro, 2019. "Integration in the European electricity market: A machine learning-based convergence analysis for the Central Western Europe region," Energy Policy, Elsevier, vol. 132(C), pages 549-566.
    3. Abadie, Luis María & Chamorro, José Manuel, 2021. "Evaluation of a cross-border electricity interconnection: The case of Spain-France," Energy, Elsevier, vol. 233(C).
    4. Halkos, George, 2020. "Examining the level of competition in the energy sector," MPRA Paper 98343, University Library of Munich, Germany.
    5. Ákos Hamburger, 2019. "Is guarantee of origin really an effective energy policy tool in Europe? A critical approach," Society and Economy, Akadémiai Kiadó, Hungary, vol. 41(4), pages 487-507, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Pozo & Enzo Sauma & Javier Contreras, 2017. "Basic theoretical foundations and insights on bilevel models and their applications to power systems," Annals of Operations Research, Springer, vol. 254(1), pages 303-334, July.
    2. Alexander Zerrahn & Daniel Huppmann, 2014. "Network Expansion to Mitigate Market Power: How Increased Integration Fosters Welfare," Discussion Papers of DIW Berlin 1380, DIW Berlin, German Institute for Economic Research.
    3. Alexander Zerrahn & Daniel Huppmann, 2017. "Network Expansion to Mitigate Market Power," Networks and Spatial Economics, Springer, vol. 17(2), pages 611-644, June.
    4. Taheri, S. Saeid & Kazempour, Jalal & Seyedshenava, Seyedjalal, 2017. "Transmission expansion in an oligopoly considering generation investment equilibrium," Energy Economics, Elsevier, vol. 64(C), pages 55-62.
    5. Paul Twomey & Richard Green & Karsten Neuhoff & David Newbery, 2005. "A Review of the Monitoring of Market Power: The Possible Roles of TSOs in Monitoring for Market Power Issues in Congested Transmission Systems," Working Papers 0502, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    6. Bjørndal, Mette & Gribkovskaia, Victoria & Jörnsten, Kurt, 2014. "Market Power in a Power Market with Transmission Constraints," Discussion Papers 2014/29, Norwegian School of Economics, Department of Business and Management Science.
    7. Grimm, Veronika & Martin, Alexander & Schmidt, Martin & Weibelzahl, Martin & Zöttl, Gregor, 2016. "Transmission and generation investment in electricity markets: The effects of market splitting and network fee regimes," European Journal of Operational Research, Elsevier, vol. 254(2), pages 493-509.
    8. SMEERS, Yves, 2005. "How well can one measure market power in restructured electricity systems ?," LIDAM Discussion Papers CORE 2005050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Huppmann, Daniel & Egerer, Jonas, 2015. "National-strategic investment in European power transmission capacity," European Journal of Operational Research, Elsevier, vol. 247(1), pages 191-203.
    10. Weigt, Hannes, 2009. "A Review of Liberalization and Modeling of Electricity Markets," MPRA Paper 65651, University Library of Munich, Germany.
    11. Helman, Udi, 2006. "Market power monitoring and mitigation in the US wholesale power markets," Energy, Elsevier, vol. 31(6), pages 877-904.
    12. Paul Simshauser & Farhad Billimoria & Craig Rogers, 2021. "Optimising VRE plant capacity in Renewable Energy Zones," Working Papers EPRG2121, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    13. Willems, Bert & Rumiantseva, Ina & Weigt, Hannes, 2009. "Cournot versus Supply Functions: What does the data tell us?," Energy Economics, Elsevier, vol. 31(1), pages 38-47, January.
    14. Dzikri Firmansyah Hakam, 2018. "Market Power Modelling in Electricity Market: A Critical Review," International Journal of Energy Economics and Policy, Econjournals, vol. 8(5), pages 347-356.
    15. Pepermans, Guido & Willems, Bert, 2010. "Cost Recovery in Congested Electricity Networks," Working Papers 2010/22, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    16. Grimm, Veronika & Martin, Alexander & Weibelzahl, Martin & Zöttl, Gregor, 2014. "Transmission and Generation Investment in Electricity Markets: The Effects of Market Splitting and Network Fee Regimes," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 460, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    17. Simshauser, Paul, 2021. "Renewable Energy Zones in Australia's National Electricity Market," Energy Economics, Elsevier, vol. 101(C).
    18. Alberto Orgaz & Antonio Bello & Javier Reneses, 2019. "A New Model to Simulate Local Market Power in a Multi-Area Electricity Market: Application to the European Case," Energies, MDPI, vol. 12(11), pages 1-15, May.
    19. Karsten Neuhoff, 2003. "Integrating Transmission and Energy Markets Mitigates Market Power," Working Papers EP17, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    20. Sertaç Oruç & Scott Cunningham, 2014. "Transmission Rights to the Electrical Transmission Grid in the Post Liberalization Era," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 5(4), pages 686-705, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:96:y:2016:i:c:p:260-273. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.