Incentives for Transmission Investment in the PJM Electricity Market: FTRs or Regulation (or Both?)

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper presents an application of a mechanism that provides incentives to promote transmission network expansion in the area of the US electric system known as PJM. The applied mechanism combines the merchant and regulatory approaches to attract investment into transmission grids. It is based on rebalancing a two-part tariff in the framework of a wholesale electricity market with locational pricing. The expansion of the network is carried out through the sale of financial transmission rights for the congested lines. The mechanism is tested for 14-node and 17-node geographical coverage areas of PJM. Under Laspeyres weights, it is shown that prices converge to the marginal cost of generation, the congestion rent decreases, and the total social welfare increases.The mechanism is shown to adjust prices effectively given either non-peak or peak demand.

Towards optimal regulation of transmission network investment under renewable integration

“…In contrast, both the cost-regulatory case and the scenario without regulation do not lead to network expansion. These fmdings confIrm the results of previous numerical simulations [3], [7], [8], [9]. In the cases with exogenously changing generation capacities, however, these results do not hold any longer.…”

A lattice method for jump-diffusion process applied to transmission expansion investments under demand and distributed generation uncertainties

“…It provides market participants with an opportunity to collect revenue based on LMP differences. In this market, power-generating companies also pay for transmission investments that can be regarded as fixed part of revenue (for a more enlightening discussion, see [34]). We observe that some other electricity markets have designed a system in which distribution utilities and power generators pay for transmission investments (see [35,36] for an example of transmission access charge).…”

Does size matter? Simulating electricity market coupling between Colombia and Ecuador

“…Regarding the expansion of the transmission grid, Rosellón et al [30] present an application of a mechanism combining the merchant and regulatory approaches to attract investment in transmission capacity in the PJM market in the US, arguing that to date there is no coherent mechanism to promote adequate expansion of this system. Their simulations indicate that the mechanism is promising in that congestion is relieved and nodal prices converge to a lower average level, so total welfare increases.…”