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Testing Regulatory Regimes for Power Transmission Expansion with Fluctuating Demand and Wind Generation

Aufsätze referiert extern - Web of Science

Wolf-Peter Schill, Jonas Egerer, Juan Rosellón

In: Journal of Regulatory Economics 47 (2015) 1, S. 1-28


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 real-world 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.

Wolf-Peter Schill

Head of the research area „Transformation of the Energy Economy“ in the Energy, Transportation, Environment Department

JEL-Classification: L50;L94;Q40
Keywords: Electricity transmission, Incentive regulation, Renewable integration, Europe

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