Definition of a Balancing Point for Electricity Transmission Contracts
View / Open Files
Authors
Olmos, Luis
Neuhoff, Karsten
Publication Date
2004-06-16Series
Cambridge Working Papers in Economics
Publisher
Faculty of Economics
Language
en_GB
Type
Working Paper
Metadata
Show full item recordCitation
Olmos, L., & Neuhoff, K. (2004). Definition of a Balancing Point for Electricity Transmission Contracts. https://doi.org/10.17863/CAM.5404
Abstract
Electricity transmission contracts allocate scarce resources, allow hedging against locational price differences and provide information to guide investment. Liquidity is increased if all transmission contracts are defined relative to one balancing point, then a set of two contracts can replicate any point to point contract. We propose an algorithm and apply it to the European electricity network to identify a well connected balancing point that exhibits minimal relative cross-price responses and hence reduces market power exercised by generation companies. Market level data which is difficult to obtain or model such as price levels in different regions or that is dependent on the time scale of interaction, as demand elasticity, is not required. The only critical input quantities are assumptions on future transmission constraint patterns.
Keywords
Classification-JEL: D43, L94, L50, Keywords: Transmission contract design, Congestion management, Market Power, European electricity network
Identifiers
This record's DOI: https://doi.org/10.17863/CAM.5404
Statistics
Total file downloads (since January 2020). For more information on metrics see the
IRUS guide.