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Merchant and Regulated Transmission: Theory, Evidence and Policy

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  • Littlechild, S.

Abstract

Economists acknowledge the problems of regulated transmission but take different views about the likely efficiency of merchant transmission. This paper examines the evidence on alleged market failure and regulatory failure as experienced in practice in Australia and Argentina. In these examples, merchant transmission (broadly defined to include private initiatives) has generally not exhibited the standard examples of market failure but regulated transmission generally has exhibited the standard examples of regulatory failure. Imperfect information – more specifically, in the form of lack of coordination – has often been a challenge whatever the approach. Policy should therefore seek to improve the regulatory framework and to remove barriers to merchant transmission and private initiatives. An important role for regulation is to facilitate coordination between potential providers and users of transmission lines.

Suggested Citation

  • Littlechild, S., 2011. "Merchant and Regulated Transmission: Theory, Evidence and Policy," Cambridge Working Papers in Economics 1160, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1160
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    Cited by:

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    3. Clemens Gerbaulet & Alexander Weber, 2014. "Is There Still a Case for Merchant Interconnectors?: Insights from an Analysis of Welfare and Distributional Aspects of Options for Network Expansion in the Baltic Sea Region," Discussion Papers of DIW Berlin 1404, DIW Berlin, German Institute for Economic Research.
    4. Pineau, P.-O. & Dupuis, D.J. & Cenesizoglu, T., 2015. "Assessing the value of power interconnections under climate and natural gas price risks," Energy, Elsevier, vol. 82(C), pages 128-137.
    5. Chao, Hung-po & Wilson, Robert, 2020. "Coordination of electricity transmission and generation investments," Energy Economics, Elsevier, vol. 86(C).
    6. Ali Darudi & Hannes Weigt, 2024. "Review and Assessment of Decarbonized Future Electricity Markets," Energies, MDPI, vol. 17(18), pages 1-38, September.
    7. Gerbaulet, C. & Weber, A., 2018. "When regulators do not agree: Are merchant interconnectors an option? Insights from an analysis of options for network expansion in the Baltic Sea region," Energy Policy, Elsevier, vol. 117(C), pages 228-246.
    8. Poudineh, Rahmatallah & Rubino, Alessandro, 2017. "Business model for cross-border interconnections in the Mediterranean basin," Energy Policy, Elsevier, vol. 107(C), pages 96-108.

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    More about this item

    Keywords

    regulated transmission; market transmission;

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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