Transmission Rights and Transmission Expansions

Gribik, Paul R.; Shirmohammadi, D.; Graves, J.S.; Kritikson, Jim

doi:10.1109/tpwrs.2005.851919

Cited by 50 publications

(51 citation statements)

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“…See Gribik et al (2004) for a discussion of separate rights associated with impedances and prices for impedances as in O'Neill et al (2005). For a load-flow model for real power (DC load approximation), the Transco's profit maximization problem is given by: ] so that the vector of net injections is q = Qe, where e is a unit vector.…”

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confidence: 99%

Toward a Combined Merchant-Regulatory Mechanism for Electricity Transmission Expansion

2010

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OverviewElectricity transmission pricing and transmission grid expansion have received increasing regulatory and analytical attention in recent years. Since electricity transmission is a very special service with unusual characteristics, such as loop flows, the approaches have been largely tailor-made and not simply taken from the general economic literature or from the more specific but still general incentive regulation literature. An exception has been Vogelsang (2001), who postulated transmission cost and demand functions with fairly general properties and then adapted known regulatory adjustment processes to the electricity transmission problem. A concern with this approach has been that the properties of transmission cost and demand functions are little known but are suspected to differ from conventional functional forms. The assumed cost and demand properties in Vogelsang (2001) may actually not hold for transmission companies (Transcos). Loop-flows imply that certain investments in transmission upgrades cause negative network effects on other transmission links, so that capacity is multidimensional. Total network capacity might even decrease due to the addition of new capacity in certain transmission links. The transmission capacity cost function can be discontinuous. There are two disparate approaches to transmission investment: one employs the theory based on long-run financial rights (LTFTR) to transmission (merchant approach), while the other is based on the incentive-regulation hypothesis (regulatory approach). An independent system operator (ISO) handles the actual dispatch and operational pricing. The transmission firm is regulated through benchmark or price regulation to provide long-term investment incentives while avoiding congestion. In this paper we consider the elements that could combine the merchant and regulatory approaches in a setting with price-taking electricity generators and loads. MethodsBased on LTFTRs, merchant mechanisms are easiest to understand for incrementally small expansions in meshed networks under an ISO environment. The price-cap method seeks to regulate a monopoly Transco. The regulatory goal in this paper is an extension of Vogelsang (2001) for meshed projects. Transmission output is redefined in terms of incremental LTFTRs (or total LTFTRs, if a long period is assumed) so as to be able to apply the Vogelsang's incentive mechanism to a meshed network. For lumpy and large transmission projects a fixed part of the tariff plays the role of a complementary charge. The variable part of the tariff is based on nodal prices; pricing for the different cost components of transmission is such that they do not conflict with each other (fixed costs are allocated so that the variable charges are able to reflect nodal prices); variations in fixed charges over time partially counteract the variability of nodal prices giving some price insurance to the market participants. * Contact author: División de Economía, CIDE, Carret. México-Toluca 3655, Lomas de Santa Fé, C.P. 01210,...

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Toward a Combined Merchant-Regulatory Mechanism for Electricity Transmission Expansion

2010

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“…Another problem is that it may not be possible to restore simultaneous feasibility by issuing IFTRs according to the investor's preference. In this context, a combined flowgate right and admittance right approach was proposed in [57] as an alternative to the IFTR approach. However, the suggested approach seems not to be able to differentiate new investments from existing resources.…”

Section: Ftrs and Merchant Transmission Investmentmentioning

confidence: 99%

A Comprehensive Assessment of the Evolution of Financial Transmission Rights

Sarkar

Khaparde

2008

IEEE Trans. Power Syst.

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Abstract-Financial transmission rights (FTRs) are complementary to the locational marginal pricing of energy. The basic aim of the FTR mechanism is to guard forward contracts from uncertain congestion charges. FTRs are also useful to individual generators and loads for selling and buying power, respectively, at the prices of other locations. The concept has evolved, encompassing many features such as a simultaneous feasibility test, various ways to conduct auctions and allocations and secondary trading. FTRs also have a close relation to market power and transmission investment. This paper reviews most of the landmark research papers on the evolution of the FTR concept. It reports a comprehensive assessment of various facets of FTRs and allied issues. Financial transmission rights and flowgate rights (FGRs) are compared. The concept of long-term FTRs is discussed. The paper also touches upon future proposals in this area.

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“…The LT concept is important for expansion projects. As argued by Gribik et al (2002), most auctions allocate FTRs with durations of one month through five years. Since a transmission project has a useful life of approximately 30 years, the owner of such a project would prefer to receive LT FTRs.…”

Section: Long-term Ftrs and Transmission Expansionmentioning

confidence: 99%

“…Another alternative effort to define LT rights is provided by Gribik et al (2002). They base their method on the physical characteristics of the transmission network -namely capacity and admittance -in contrast to the definition of incremental PTP FTRs that, as shown by Hogan (2002b), Pope (2002), and Harvey (2002) can give rise to numerous inconsistencies.…”

Section: Practical Proposalsmentioning

confidence: 99%

Different Approaches Towards Electricity Transmission Expansion

Rosellón

2003

SSRN Journal

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There is an intense debate regarding the best way to attract investment for the long-term expansion of an electricity transmission network. We study three hypotheses: the long-term financialtransmission-right hypothesis; the incentive-regulation hypothesis; and the market-power hypothesis. The first approach derives optimal transmission expansion through auctions of longterm financial transmission rights by an independent system operator. The second provides a Transco with incentives to expand the network by making it face the entire social cost of congestion. The third approach defines optimal transmission expansion according to the strategic behavior of generators. This paper discusses the analytical and practical strengths and weaknesses of each approach.

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Transmission Rights and Transmission Expansions

Cited by 50 publications

References 6 publications

Toward a Combined Merchant-Regulatory Mechanism for Electricity Transmission Expansion

Toward a Combined Merchant-Regulatory Mechanism for Electricity Transmission Expansion

A Comprehensive Assessment of the Evolution of Financial Transmission Rights

Different Approaches Towards Electricity Transmission Expansion

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