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Optimal expansion of the power transmission grid: why not?

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Abstract

While the transmission grid is essential to the operation of well-functioning electric power markets, it appears to be lacking in many regions. This article investigates the causes of this situation, that reviews the main prescriptions of the academic literature, and compares them with experience from sixteen jurisdictions that have restructured their power industry in the last twenty years. We find that vertical separation may be necessary, but is not sufficient to induce grid expansion: a well-designed incentive scheme is also required. When both vertical separation and specific incentives are present, significant congestion reduction is observed.

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Authors and Affiliations

  1. Toulouse School of Economics, Toulouse, France

    Thomas-Olivier Léautier & Véronique Thelen

  2. University of Toulouse Graduate School of Management, Toulouse, France

    Thomas-Olivier Léautier

Authors
  1. Thomas-Olivier Léautier
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  2. Véronique Thelen
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Correspondence to Thomas-Olivier Léautier.

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Léautier, TO., Thelen, V. Optimal expansion of the power transmission grid: why not?. J Regul Econ 36, 127–153 (2009). https://doi.org/10.1007/s11149-008-9086-8

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  • DOI: https://doi.org/10.1007/s11149-008-9086-8

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