Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/183387 
Year of Publication: 
2017
Series/Report no.: 
IFN Working Paper No. 1158
Publisher: 
Research Institute of Industrial Economics (IFN), Stockholm
Abstract: 
A successful transformation to a carbon neutral energy system requires the correct investments in transmission and production capacity. In a zonal pricing electricity market, the one proposed by the European Commission to integrate the European electricity markets, I analyze the effects that investments in transmission and production capacity have on consumer welfare and suppliers' profits. In the specific setting of this paper, I show that when the competition is perfect, an investment in transmission capacity between zones (inter Transmission System Operator (TSO) investment) and an investment in production capacity generate the same equilibrium outcome allocations. In contrast, when the competition is imperfect, an inter TSO investment and an investment in production capacity generate different equilibrium outcome allocations.
Subjects: 
electricity auctions
wholesale electricity markets
transmission capacity constraints
investment transmission capacity
investment production capacity
energy economics
JEL: 
D43
D44
L13
L94
Document Type: 
Working Paper

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