Use of Long-term Auctions for Network Investment
Preprint
Repository DOI
Change log
Authors
McDaniel, Tanga
Neuhoff, Karsten
Abstract
Short-term auctions for access to entry terminals of the British gas-network appear to successfully allocate scarce resources and capture scarcity rent. Now long-term auctions are being introduced to guide future capacity expansion decisions. In our model the fraction of rights issued in the long-term auction turns out to be a crucial design parameter. Even a hypothetically
optimal parameter choice can in general only satisfy one of three aims: Unbiased provision of capacity, full revelation of private information and minimisation of distortions from network effects. The results suggest that long-term auctions for transmission capacity are not necessarily preferable to regulatory approved capacity expansion.
Description
Keywords
gas, investment, networks, regulation
Is Part Of
Publisher
Faculty of Economics