Ramsey Pricing in a Congested Network with Market Power in Generation: A Numerical Illustration for Belgium.

This paper derives the socially optimal transmission prices in a congested electricity network when there is imperfect competition in generation, and when the budget constraint of the network operator is binding. The results which we derive are a generalization of the standard Ramsey prices and also of the locational marginal prices (LMP). The model is illustrated with a numerical model based on the Belgian electricity data.

Ramsey Pricing in a Congested Network with Market Power in Generation: A Numerical Illustration for Belgium.

Abstract: This paper derives the socially optimal transmission prices in a congested electricity network when there is imperfect competition in generation, and when the budget constraint of the network operator is binding. The results which we derive are a generalization of the standard Ramsey prices and also of the locational marginal prices (LMP). The model is illustrated with a numerical model based on the Belgian electricity data.Regulation, Transmission, Electricity, Cournot, Numerical model, Security constraints, MPEC, loadflow, Belgium

Regulatory reforms of European network industries and the courts

Regulatory reforms in European network industries are strongly influenced by legal decisions. The cases considered in this paper not only initiated the liberali-zation process of the markets for network services but also provided an impor-tant signaling function for the remaining regulatory problems: localization of network-specific market power, abolishment of grandfathering rights, ex ante regulation of network-specific market power instead of negotiated unregulated network access, incentive regulation instead of cost-based regulation. The process towards sector-symmetric market power regulation based on economi-cally founded principles gains increasing relevance. Nevertheless, there are fur-ther reform potentials to be exhausted in the future. --

Degree of coordination in market-coupling and counter-trading

Cross-border trade remains a contentious issue in the restructuring of the European electricity market. Difficulties stem from the lack of a common market design, the separation between energy and transmission markets and the insufficient coordination between Transmission System Operators (TSOs). This paper analyzes the cross-border trade problem through a set of models that represent different degrees of coordination both between the energy and transmission markets and among national TSOs.We first present the optimal organisation, not implemented in Europe, where energy and transmission are integrated according to the nodal price paradigm and Power Exchanges (PXs) and TSOs are integrated. This is our reference case. We then move to a more realistic representation of the European electricity market based on the so-called market-coupling design where energy and transmission are operated separately by PXs and TSOs. When considering different degrees of coordination of the national TSOs’ activities, we unexpectedly find that some arrangements are more efficient than the lack of coordination might suggest. Specifically we find that even without a formal coordination of the TSOs’ counter-trading operations, non discriminatory access to common counter-trading resources for all TSOs may lead to a partial implicit coordination of these TSOs. In other words, an internal market of counter-trading resources partially substitutes the lack of integration of the TSOs. While a full access to counter-trading resources is a weaker requirement than the horizontal integration of the TSO, it is still quite demanding. We show that quantitative limitations to the access of these resources decrease the efficiency of counter-trading. The paper supposes price taking agents and hence leaves aside the incentive to game the system induced by zonal systems.Cross-Border Energy Trade, Market-Coupling, Counter-Trading, Coordination, Generalized Nash Equilibrium

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

This 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.Electricity transmission expansion, incentive regulation, PJM

Urban Transportation Policy: A Guide and Road Map

The main transportation issues facing cities today fall into familiar categories--congestion and public transit. For congestion, there is now a far richer menu of options that are understood, technically feasible, and perhaps politically feasible. One can now contemplate offering roads of different qualities and prices. Many selected road segments are now operated by the private sector. Road pricing is routinely considered in planning exercises, and field experiments have made it more familiar to urban voters. Concerns about environmental effects of urban trucking have resulted in serious interest in tolled truck-only express highways. As for public transit, there is a need for political mechanisms to allow each type of transit to specialize where it is strongest. The spread of “bus rapid transit†has opened new possibilities for providing the advantages of rail transit at lower cost. The prospect of pricing and privatizing highway facilities could reduce the amount of subsidy needed to maintain a healthy transit system. Privately operated public transit is making a comeback in other parts of the world. The single most positive step toward better urban transportation would be to encourage the spread of road pricing. A second step, more speculative because it has not been researched, would be to use more environmentally-friendly road designs that provide needed capacity but at modest speeds, and that would not necessarily serve all vehicles.Transportation policy; Road pricing; Privatization; Product differentiation

Merchant Transmission Investment

We examine the performance attributes of a merchant transmission investment framework that relies on market driven' transmission investment to provide the infrastructure to support competitive wholesale markets for electricity. Under a stringent set of assumptions, the merchant investment model has a remarkable set of attributes that appear to solve the natural monopoly problem traditionally associated with electricity transmission networks. We extend the merchant investment model to incorporate imperfections in wholesale electricity markets, lumpiness in transmission investment opportunities, stochastic attributes of transmission networks and associated property rights definition issues, the effects of behavior of transmission owners and system operators on transmission capacity, maintenance and reliability, coordination and bargaining considerations, forward contract, commitment and asset specificity issues. Incorporating these more realistic attributes of transmission networks and the behavior of transmission owners and system operators undermines the attractive properties of the merchant model and leads to inefficient transmission investment decisions.

Merchant Transmission Investment

We examine the performance attributes of a merchant transmission investment framework that relies on �market driven� transmission investment to provide the infrastructure to support competitive wholesale markets for electricity. Under a stringent set of assumptions, the merchant investment model appears to solve the natural monopoly problem and the associated need for regulating transmission companies traditionally associated with electric transmission networks. We expand the model to incorporate imperfection in wholesale electricity markets, lumpiness in transmission investment opportunities, stochastic attributes of transmission networks and associated property rights definition issues, the effects of the behaviour system operators and transmission owners on transmission capacity and reliability, co-ordination and bargaining considerations, forward contract, commitment and asset specificity issues. This significantly undermines the attractive properties of the merchant investment model. Relying primarily on a market driven investment framework to govern investment is likely to lead to inefficient investment decisions and undermine the performance of competitive markets