Providing Efficient Network Access to Green Power Generators: A Long-Term Property Rights Perspective.

CentER Discussion Paper No. 2017-010

TILEC Discussion Paper No. 2017-007

28 Pages Posted: 24 Feb 2017 Last revised: 25 Jul 2017

Georgios Petropoulos

Bruegel

Bert Willems

Tilburg University - Department of Economics - CentER & TILEC; University of Toulouse 1 - Toulouse School of Economics (TSE)

Date Written: February 22, 2017

Abstract

Coordinating the timing of new production facilities is one of the challenges of liberalized power sectors. It is complicated by the presence of transmission bottlenecks, oligopolistic competition and the unknown prospects of low-carbon technologies. We build a model encompassing a late and early investment stage, an existing dirty (brown) and a future clean (green) technology and a single transmission bottleneck, and compare dynamic efficiency of several market designs. Allocating network access on a short-term competitive basis distorts investment decisions, as brown firms will preempt green competitors by investing early. Dynamic efficiency is restored with long-term transmission rights that can be traded on a secondary market. We show that dynamic efficiency does not require the existence of physical rights for accessing the transmission line, but financial rights on receiving the scarcity revenues generated by the transmission line suffice.

Keywords: network access, congestion management, renewable energy sources, power

JEL Classification: L94, L13, C72, D43

Suggested Citation

Petropoulos, Georgios and Willems, Bert, Providing Efficient Network Access to Green Power Generators: A Long-Term Property Rights Perspective. (February 22, 2017). CentER Discussion Paper No. 2017-010; TILEC Discussion Paper No. 2017-007. Available at SSRN: https://ssrn.com/abstract=2923037 or http://dx.doi.org/10.2139/ssrn.2923037

Georgios Petropoulos

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium
Belgium
22274217 (Phone)
22274217 (Fax)

Bert Willems (Contact Author)

Tilburg University - Department of Economics - CentER & TILEC ( email )

P.O. Box 90153 Room K308
Tilburg, 5000LE
Netherlands
+31134662588 (Phone)

HOME PAGE: http://www.bertwillems.com

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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