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Merchant investment in electricity transmission networks

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  • Biggar, Darryl R.
  • Hesamzadeh, Mohammad Reza

Abstract

Many electricity economists have long hoped that it might be possible to establish competition, not just in providing generation and load assets, but also in the provision of the transmission network itself. Attempts in the 1990s to achieve so-called merchant transmission investment using conventional Financial Transmission Rights (FTRs) proved disappointing. We develop an extension of screening-curve models to include the optimal choice of both generation and transmission. Such models, although stylised, provide valuable insight into the long-run co-optimisation of generation and transmission. We propose new regulatory and merchant transmission investment mechanisms that achieve the socially optimal investment.

Suggested Citation

  • Biggar, Darryl R. & Hesamzadeh, Mohammad Reza, 2024. "Merchant investment in electricity transmission networks," Utilities Policy, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:juipol:v:90:y:2024:i:c:s0957178724000894
    DOI: 10.1016/j.jup.2024.101796
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    References listed on IDEAS

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    1. Paul Joskow & Jean Tirole, 2005. "Merchant Transmission Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 53(2), pages 233-264, June.
    2. Biggar, Darryl R. & Hesamzadeh, Mohammad Reza, 2022. "An integrated theory of dispatch and hedging in wholesale electric power markets," Energy Economics, Elsevier, vol. 112(C).
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    7. William Hogan & Juan Rosellón & Ingo Vogelsang, 2010. "Toward a combined merchant-regulatory mechanism for electricity transmission expansion," Journal of Regulatory Economics, Springer, vol. 38(2), pages 113-143, October.
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