The Dynamic Impact of Market Integration: Evidence from Renewable Energy Expansion in Chile

Gonzáles, Luis; Ito, Koichiro; Reguant, Mar

doi:10.3386/w30016

Cited by 3 publications

(6 citation statements)

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“…Prior to this Analysis, studies of transmission value using historical market price data focused on select severe weather [1], [2] or geopolitical [4] events, the specific benefits of increased competition [32], [34], measuring the impact of a specific transmission investment that is already online [25], [26], [27], or congestion on existing lines within a limited footprint (ISO/RTO annual reports, such as [40], [41], [42]). This paper contributes to a more complete understanding of transmission's value, cost-effectiveness, and market barriers and aids efforts to improve modeling practices by identifying key patterns and value drivers for use in model validation.…”

Section: Discussionmentioning

confidence: 99%

“…The impact of market depth is accounted for in the following analysis through the use of statistically-based rolling supply curves, as detailed in the Methods, and assumes a static market. That is, it does not account for generator entry and exit [26], [27], demand changes, shifts in market power [32], [33], [34], or other dynamic effects that transmission expansion may create.…”

Section: Market Depth and Saturation Effectsmentioning

confidence: 99%

“…On the other hand, while the marginal market value reflects elements of transmission's system value (e.g., savings to electricity production costs and the costs of ensuring reliability) it does not fully capture all benefits (e.g., impacts on generation capacity sharing, reduction in unpriced or mispriced emissions) and it includes generator rents, a reduction in which is not necessarily a net economic benefit but rather a redistribution. Further, there are dynamic impacts of transmission expansion on generator entry and [27] found that "ignoring this dynamic effect (…) would substantially understate the benefits of transmission investments." Therefore, a link's empirical marginal market value cannot be treated as a direct measure of, or strict upper or lower bound on, the total economic impact of expanded transmission capacity along the link.…”

Section: Marginal Transmission Market Value Based On Historical Datamentioning

confidence: 99%

“…LMPs are defined by the seven independent system operators (ISOs) and regional transmission organizations (RTOs) in the US (i.e., CAISO, ERCOT, ISO-NE, MISO, PJM, and SPP) at over 80,000 nodes, typically for both a forward day-ahead market and a spot real-time market. Market prices are a rich data source that have been used by researchers to advance our understanding of the value of renewable energy [22], [23], efficient levels of subsides for energy efficiency [24], and the impact of specific transmission investments that are already online [25], [26], [27], for example. This paper contributes to a more complete understanding of transmission's value, cost-effectiveness, and market barriers and aids efforts to improve modeling practices.…”

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confidence: 99%

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Electric transmission value and its drivers in United States power markets

Kemp,

Millstein,

Gorman

et al. 2024

Preprint

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Electric transmission infrastructure serves a critical role during extreme weather and supply disruptions and can enable low-cost, low-carbon electricity systems. This paper contributes to a more complete understanding of transmission’s value, cost-effectiveness, and market barriers. By studying wholesale energy market prices in the United States during 2012-2022, we find that additional transfer capacity between regions was especially valuable (median of $116M/GW-year) and directionally balanced. Transmission’s market value was highly influenced by a small fraction of time: 5% of hours typically capture at least 45% of value. These peak periods were driven primarily by unforeseen changes in conditions within one day of operations. Transmission infrastructure cost estimates were less than market values for most studied locations, including all links crossing regional seams where value-to-cost ratios were frequently above 4, suggesting barriers to the development of valuable infrastructure. These results complement forward-looking modeling studies and aid efforts to improve modeling practices.

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Section: Discussionmentioning

confidence: 99%

Section: Market Depth and Saturation Effectsmentioning

confidence: 99%

Section: Marginal Transmission Market Value Based On Historical Datamentioning

confidence: 99%

mentioning

confidence: 99%

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Electric transmission value and its drivers in United States power markets

Kemp,

Millstein,

Gorman

et al. 2024

Preprint

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“…88 See the Appendix in the Online Supplementary Material (Gonzales, Ito, and Reguant (2023)) for mathematical proofs of all results. …”

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confidence: 99%

The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile

Gonzales,

Ito,

Reguant

2023

ECTA

Self Cite

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We study the investment effects of market integration on renewable energy expansion. Our theory highlights that market integration not only improves allocative efficiency by gains from trade but also incentivizes new investment in renewable power plants. To test our theoretical predictions, we examine how recent grid expansions in the Chilean electricity market changed electricity production, wholesale prices, generation costs, and renewable investments. We then build a structural model of power plant entry to quantify the impact of market integration with and without the investment effects. We find that the market integration in Chile increased solar generation by around 180%, saved generation costs by 8%, and reduced carbon emissions by 5%. A substantial amount of renewable entry would not have occurred in the absence of market integration. Our findings suggest that ignoring these investment effects would substantially understate the benefits of market integration and its important role in expanding renewable energy.

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A growth-friendly and inclusive green transition strategy for Thailand

2024

OECD Economics Department Working Papers

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The Dynamic Impact of Market Integration: Evidence from Renewable Energy Expansion in Chile

Cited by 3 publications

References 0 publications

Electric transmission value and its drivers in United States power markets

Electric transmission value and its drivers in United States power markets

The Investment Effects of Market Integration: Evidence From Renewable Energy Expansion in Chile

A growth-friendly and inclusive green transition strategy for Thailand

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