Transmission rights and market power on electric power networks

Paul L. Joskow, Jean Tirole

Research output: Contribution to journalArticlepeer-review

276 Scopus citations

Abstract

We analyze whether and how the allocation of transmission rights associated with the use of electric power networks affects the behavior of electricity generators and consumers with market power. We also examine how the allocation of transmission rights is affected by the microstructure of the markets for these rights. Both financial and physical transmission rights are considered. The analysis focuses on a two-node network where there are cheap generating supplies in an exporting region and expensive generating supplies in an importing region. Extensions to a network with loop flow are developed. Regulatory mechanisms for detecting and mitigating the market-power-enhancing effects of transmission rights holdings are discussed.

Original languageEnglish (US)
Pages (from-to)450-487
Number of pages38
JournalRAND Journal of Economics
Volume31
Issue number3
DOIs
StatePublished - 2000

ASJC Scopus subject areas

  • Economics and Econometrics

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