Transmission and Generation Investment in Electricity Markets: The effect of Market Splitting and Network Fee Regimes

Journal article
(Original article)


Publication Details

Author(s): Grimm V, Martin A, Schmidt M, Weibelzahl M, Zöttl G
Journal: European Journal of Operational Research
Publication year: 2016
Volume: 254
Journal issue: 2
Pages range: 493-509
ISSN: 0377-2217
Language: English


Abstract


We propose an equilibrium model that allows to analyze the long-run impact of the regulatory environment on transmission line expansion by the regulator and investment in generation capacity by private firms in liberalized electricity markets. The model incorporates investment decisions of the transmission operator and private firms in expectation of an energy-only market and cost-based redispatch. In different specifications we consider the cases of one vs. multiple price zones (market splitting) and analyze different approaches to recover network cost - in particular lump sum, generation capacity based, and energy based fees. In order to compare the outcomes of our multistage market model with a first-best benchmark, we also solve the corresponding integrated planner problem. Using two test networks we illustrate that energy-only markets can lead to suboptimal locational decisions for generation capacity and thus imply excessive network expansion. Market splitting heals these problems only partially. These results are valid for all considered types of network tariffs, although investment slightly differs across those regimes.



FAU Authors / FAU Editors

Grimm, Veronika Prof. Dr.
Lehrstuhl für Volkswirtschaftslehre, insbesondere Wirtschaftstheorie
Martin, Alexander Prof. Dr.
Lehrstuhl für Wirtschaftsmathematik
Schmidt, Martin Prof. Dr.
Juniorprofessur für Optimierung von Energiesystemen
Weibelzahl, Martin
Lehrstuhl für Wirtschaftsmathematik
Zöttl, Gregor Prof. Dr.
Fachbereich Wirtschaftswissenschaften


How to cite

APA:
Grimm, V., Martin, A., Schmidt, M., Weibelzahl, M., & Zöttl, G. (2016). Transmission and Generation Investment in Electricity Markets: The effect of Market Splitting and Network Fee Regimes. European Journal of Operational Research, 254(2), 493-509. https://dx.doi.org/10.1016/j.ejor.2016.03.044

MLA:
Grimm, Veronika, et al. "Transmission and Generation Investment in Electricity Markets: The effect of Market Splitting and Network Fee Regimes." European Journal of Operational Research 254.2 (2016): 493-509.

BibTeX: 

Last updated on 2018-19-04 at 04:01