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Transmission constraints and strategic underinvestment in electric power generation

Author

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  • Léautier, Thomas-Olivier
Abstract
This article is the first to examine electric power producers' investment decisions when com- petition is imperfect and the transmission grid congested. This analysis yields numerous original insights. First, congestion on the grid is transient, and may disappear when demand is highest. Second, transmission capacity increases have complex impacts on generation: they may increase, decrease, or have no impact on the marginal value of generation, and may have similar or opposite impacts on the marginal value of different technologies. Third, the true social value of transmission, including its impact on investment, may be significantly lower than is commonly assumed.

Suggested Citation

  • Léautier, Thomas-Olivier, 2014. "Transmission constraints and strategic underinvestment in electric power generation," TSE Working Papers 13-459, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:27855
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    electric power markets; imperfect competition; investment; transmission constraints;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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