Regulated Expansion of Electricity Transmission Networks: The Effects of Fluctuating Demand and Wind Generation

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. Juan Rosellón (CIDE and DIW Berlin) Jonas Egerer (TU Dresden) Terms of use: Documents in AbstractWe study the performance of different regulatory approaches for the expansion of electricity transmission networks in the light of realistic demand patterns and fluctuating wind power. In particular, we are interested in the relative performance of a combined merchant-regulatory mechanism compared to a cost-based and a merchant-like approach. In contrast to earlier research, we explicitly include both an hourly time resolution and fluctuating wind power, which allows representing demand in a very realistic way. This substantially increases the real-world applicability of results compared to previous analyses, which were based on simplifying assumptions. We show that a combined merchant-regulatory regulation, which draws on a cap over the two-part tariff of the Transco, leads to welfare outcomes far superior to the modeled alternatives. This result proves to be robust over a range of different cases and sensitivity analyses. We also find that the intertemporal rebalancing of the two-part tariff carried out by the Transco so as to expand the network is such that the fixed tariff part turns out to be relatively large compared to extension costs.

Power System Transformation toward Renewables: An Evaluation of Regulatory Approaches for Network Expansion

“…In contrast, both the cost-regulatory case and the scenario without regulation do not lead to network expansion. These findings confirm the results of previous numerical simulations (Rosellón and Weigt, 2011, Schill et al 2011, and Ruiz and Rosellón, 2012. In the cases with exogenously changing generation capacities, however, these results do not necessarily hold any longer.…”

“…We follow the approach of Schill et al (2011). Table 4 in the Appendix lists all model sets and indices, parameters, and variables.…”

On Distributive Effects of Optimal Regulation for Power Grid Expansion

“…Electricity prices converge to the marginal cost of generation, congestion rents decrease, and the overall social welfare increases. Schill et al (2011) study the performance of different regulatory approaches to electricity transmission expansion in Northwestern Europe under realistic demand behavior and fluctuating wind-generation. They show that under such conditions the HRV mechanism provides better welfare results than the other alternatives (which include cost-of-service regulation as well as a lack of regulation).…”

“…These fees may pose problems in a real world policy implementation of such an incentive tool. Rosellón and Weigt (2012) and Schill et al (2011) suggest that price-weight parameters in the regulatory constraint in the upper level of the HRV model might be used to achieve different distributive goals among the various Pareto optimal potential solutions in such a model.…”

European Electricity Grid Infrastructure Expansion in a 2050 Context

“…• Linear cost curves for exchange capacity between two countries assume an incremental character of investments in line capacity. This neglects the lumpy character 1 Examples are: For market design Weigt et al (2010), for strategic market behavior Weigt and Hirschhausen (2008), for uncertainty and stochastic effects Abrell and Kunz (2012), for welfare distribution Egerer et al (2012), for regulatory challenges Rosellón and Weigt (2011); Schill et al (2011), and for energy system planning with the integration of renewable generation and transmission investment Leuthold et al (2009); Egerer et al (2009).…”