Working Paper No. 1070

Transmission Costs, Transmission Capacities and their Influence on Market Power in Wholesale Electricity Markets

Published: May 29, 2015, revised December 2015Pages: 47Keywords: Electricity auctions; Wholesale electricity markets; Transmission capacity constraints; Network tariffs; Energy economicsJEL-codes: D43; D44; L13; L94

Transmission Costs, Transmission Capacities and their Influence on Market Power in Wholesale Electricity Markets Mario Blázquez de Paz

The integration of electricity markets around the world has increased the importance of congestion between countries/states and has initiated a discussion of how to harmonize network tariffs. This paper analyzes how the transmission capacity and the transmission cost, such as a transmission tariff, influence bidding behavior in electricity markets.

It is shown that transmission costs can have seemingly counter-intuitive effects. Normally, more transmission capacity would improve competition, but this is not necessarily the case when one considers transmission costs. The paper also illustrates that there are cases where increasing transmission costs could have a pro-competitive effect and benefit consumers. In contrast, point of connection tariffs, which are used in the majority of the European countries, always push up electricity prices and always hurt consumers.

Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

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In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


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To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

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