Netting of Capacity in Interconnector Auctions

31 Pages Posted: 7 Mar 2006

See all articles by Felix Höffler

Felix Höffler

WHU - Otto Beisheim School of Management

Tobias Wittmann

Technical University of Berlin

Date Written: March 2006

Abstract

Scarce interconnector capacities are a severe obstacle to transregional competition and a unified market for electricity in the European Union. However, physically the interconnectors are rarely used up to capacity. This is due to the fact that the current allocation schemes make only limited use of the fact that currents in opposing directions cancel out. We propose a netting auction mechanism which makes use of this and in which even small transmission capacities can generate large competitive pressure in adjacent markets. Netting increases the usage of capacity and reduces the auctioneer's incentive to withhold capacity from the auction.

Keywords: Divisible good auctions, interconnector, electricity marktes, competition policy

JEL Classification: L 94, D44

Suggested Citation

Höffler, Felix and Wittmann, Tobias, Netting of Capacity in Interconnector Auctions (March 2006). MPI Collective Goods Preprint No. 2006/5, Available at SSRN: https://ssrn.com/abstract=888687 or http://dx.doi.org/10.2139/ssrn.888687

Felix Höffler (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Tobias Wittmann

Technical University of Berlin ( email )

Marchstr. 18
10623 Berlin
Germany
++49-30-314 23 280 (Phone)
++49-30-314 21 683 (Fax)

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