Electric grid investment under a contract network regime

This paper analyzes the incentives for electric grid investment that result from various proposed transmission network property regimes. In particular, we focus on “transmission congestion contracts” within a contract network regime such as proposed by William Hogan. We formalize a rule for awarding these new property rights to investors and show that, under certain conditions, this contract network approach can effectively deter detrimental investments, some of which are encouraged under other regimes. However, when these conditions are not met, market participants may still find it profitable to undertake network alterations which are detrimental to the network as a whole.

[1]  W. Hogan.  Contract networks for electric power transmission , 1992 .

[2]  V. Rich.  Personal communication , 1989, Nature.

[3]  International Comparisons of Electricity Regulation: Regulation, public ownership and privatisation of the English electricity industry , 1996 .

[4]  Steven Stoft,et al.  Market power in California electricity markets , 1995 .

[5]  William W. Hogan,et al.  Electric transmission: A new model for old priciples , 1993 .

[6]  Carl Blumstein,et al.  A guide to the blue book: Issues in California's electric industry restructuring and reform , 1994 .

[7]  W. Hogan,et al.  CONTRACT NETWORKS FOR ELECTRIC POWER TRANSMISSION : TECHNICAL REFERENCE , 1990 .

[8]  D. Sibley.  Spot Pricing of Electricity , 1990 .

[9]  L. Ruff,et al.  An efficient electricity market: Using a pool to support real competition , 1994 .

[10]  H. R. Outhred.  Principles of a market-based electricity industry and possible steps toward implementation in Australia , 1993 .

[11]  Folk Theorems on Transmission Access: Proofs and , 1996 .

[12]  Vikram S. Budhraja,et al.  POOLCO: An independent power pool company for an efficient power market , 1994 .

[13]  Felix F. Wu,et al.  Folk theorems on transmission access: Proofs and counterexamples , 1996 .

[14]  I. Pérez-Arriaga,et al.  Marginal pricing of transmission services: an analysis of cost recovery , 1995 .

[15]  Felix F. Wu,et al.  Nodal prices and transmission rights: A critical appraisal , 1995 .

[16]  Stephen C. Peck,et al.  A market mechanism for electric power transmission , 1996 .

[17]  S. L. Walton.  Establishing firm transmission rights using a rated system path model , 1993 .

[18]  E. Kahn,et al.  PWP-030 Transmission and Generation Investment In a Competitive Electric Power Industry , 1996 .

[19]  R. Baldick,et al.  Transmission planning issues in a competitive economic environment , 1993 .