Merchant Electricity Transmission Expansion: A European Case Study

26 Pages Posted: 17 Jul 2010

See all articles by Tarjei Kristiansen

Tarjei Kristiansen

affiliation not provided to SSRN

Juan Rosellon

Centro de Investigacion y Docencia Economicas

Date Written: July 2010

Abstract

We apply a merchant transmission model to the trilateral market coupling (TLC) arrangement among the Netherlands, Belgium and France as a generic example, and note that it can be applied to any general market splitting or coupling of Europe's different national power markets. In this merchant framework; the system operator allocates financial transmission rights (FTRs) to investors in transmission expansion based upon their preferences, and revenue adequacy. The independent system operator (ISO) preserves some proxy FTRs to deal with potential negative externalities due to an expansion project. This scheme proves to be capable in providing incentives for investment in transmission expansion projects within TLC areas.

Keywords: transmission expansion, trilateral market coupling, Europe, financial transmission rights, congestion management

JEL Classification: L51, L91, L94, Q40

Suggested Citation

Kristiansen, Tarjei and Rosellon, Juan, Merchant Electricity Transmission Expansion: A European Case Study (July 2010). DIW Berlin Discussion Paper No. 1028, Available at SSRN: https://ssrn.com/abstract=1641029 or http://dx.doi.org/10.2139/ssrn.1641029

Tarjei Kristiansen (Contact Author)

affiliation not provided to SSRN ( email )

Juan Rosellon

Centro de Investigacion y Docencia Economicas ( email )

Carretera Mexico Toluca 3655
01210 Mexico, D.F.
Mexico

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