Testing regulatory regimes for power transmission expansion with 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. Adequate extension of electricity transmission networks is required for integrating fluctuating renewable energy sources, such as wind power, into electricity systems. We study the performance of different regulatory approaches for network expansion in the context of realistic demand patterns and fluctuating wind power. In particular, we are interested in the relative performance of a combined merchant-regulatory price-cap mechanism compared to a cost-based and a non-regulated approach. We include both an hourly time resolution and fluctuating wind power. This substantially increases the realworld applicability of results compared to previous analyses. We show that a combined merchant-regulatory regulation, which draws upon a cap over the two-part tariff of the transmission company, leads to welfare outcomes superior to the other modeled alternatives. This result proves to be robust over a range of different cases, including such with large amounts of fluctuating wind power. We also evaluate the outcomes of our detailed model using the extension plans resulting from a simplified model based on average levels of load and wind power. We show that this distorts the relative performance of the different regulatory approaches. Terms of use: Documents in

A Welfare Analysis of the Electricity Transmission Regulatory Regime in Germany

“…Building on the integrated lower-level program already achieved in this paper, an upper-level programming model could be set up where the transmission company maximized its flow of profits subject to revenue-cap on operation and maintenance costs and cost-plus regulation for expansion costs. As in Schill et al (2015) and Egerer et al (2015), detailed simulations under this last model might then be contrasted (in terms of welfare) with the HRV bi-level programming model, where price-cap regulation would be applied to both investment costs and operation-maintenance costs.…”

“…This implies that a gas pipeline system can be regulated with a cost-plus rule without any significant loss of welfare. Schill et al (2015), however, reach opposite conclusions. They test different regulatory regimes under wind supply and fluctuating demand and find that, in terms of welfare convergence, incentive price-cap regulation is a superior alternative to cost-plus or no-regulation.…”

“…This issue is particularly addressed in Schill et al (2015), . Schill et al (2015) (2015) analyze the transformation of power systems toward renewables (e.g., wind substituting coal generation). They assume different scenarios on the implied effects of this transformation process on transmission network congestion.…”

“…Second step: Given such generation assumptions, the NDP is carried out by the ISO, typically using a power-flow model, in order to simultaneously derive the optimal generation dispatch and transmission expansion (as in the welfare-benchmark cases in Weigt, 2011, andSchill et al, 2015).…”

“…As opposed to Weigt (2011), andSchill et al (2015), the NEP is determined using a program that is independent from generation-power market dispatch.…”