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Working Paper No. 838

Optimal Transmission Regulation in an Integrated Energy Market

Working Paper
Tangerås, Thomas (2010). “Optimal Transmission Regulation in an Integrated Energy Market”. IFN Working Paper No. 838. Stockholm: Research Institute of Industrial Economics (IFN).

Thomas Tangerås

The capacity of the transmission network determines the extent of integration of a multinational energy market. Cross-border externalities render coordination of network maintenance and investments across countries valuable. Is it then optimal to collect powers in the hands of a single regulator? Should a common system operator manage the entire network? I show that optimal network structure depends on (i ) how the common regulator would balance the interests of the different member states; (ii ) how the gains from market integration vary across countries; (iii ) network characteristics (substitutability versus complementarity); and (iv ) the social cost of operator rent.

Thomas Tangerås

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