Electricity transmission pricing : how much does it cost to get it wrong?
Name
2004-020.pdf
Size
415.23 KB
Format
Adobe PDF
Checksum (MD5)
5a0b4df5e5253136c41f0d15075687de
Author(s)
Green, Richard
Date Issued
2004
Publisher
MIT Center for Energy and Environmental Policy Research
Series/Report no.
MIT-CEEPR (Series) ; 04-020WP.
Abstract
Economists know how to calculate optimal prices for electricity transmission. These are rarely applied in practice. This paper develops a thirteen node model of the transmission system in England and Wales, incorporating losses and transmission constraints. It is solved with optimal prices, and with uniform prices for demand and for generation, re-dispatching when needed to take account of transmission constraints. Moving from uniform prices to optimal nodal prices could raise welfare by 1.5% of the generators₂ revenues, and would be less vulnerable to market power. It would also send better investment signals, but create politically sensitive regional gains and losses.
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