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A Primer on Transmission Benefits and Cost Allocation

Abstract:
The cost of transmission facilities must be allocated to those within the transmission planning region that benefit from those facilities in a manner that is at least roughly commensurate with estimated benefits." (FERC, 2010, p. 91) Benefits include reliability, economic and public policy related impacts. Turning the principle into a workable policy is important as a support for restructured electricity markets. A challenge is to make the different measures of benefits commensurable, and to find approximations that honor the principle without imposing a standard of perfection. A framework for such cost allocation uses examples from existing models and transmission investment studies to describe how the cost allocation principle could apply within the limits of available analytical capabilities.
Purchase PDF ( $35 )Keywords: Transmission, electricity, benefits, costs, allocation, distribution

DOI: 10.5547/2160-5890.7.1.whog


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Published in Volume 7, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.