Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129628
Authors: 
Blázquez de Paz, Mario
Year of Publication: 
2015
Series/Report no.: 
IFN Working Paper 1070
Abstract: 
Capacity constraints on transmissions of electricity are raising an increasing policy concern as electricity markets are integrated around the world. But our understanding of the workings of such markets is still limited. The purpose of this paper is to highlight the impact of transmission capacity constraints and transmission costs on electricity market auctions. In the presence of transmission capacity constraints, the equilibrium is asymmetric even when the suppliers are symmetric in generation capacity and costs. An increase in transmission capacity induces non-monotonic changes in firms' profits. In the presence of transmission constraints and zero transmission costs, an increase in transmission capacity is pro-competitive; in contrast, then the transmission costs are positive, an increase in transmission capacity could be anti-competitive.
Subjects: 
electricity auctions
transmission capacity constraints
transmission costs
JEL: 
D43
D44
L13
L94
Document Type: 
Working Paper

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