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Reactive Power is a Cheap Constraint

Edward Kahn and Ross Baldick

Year: 1994
Volume: Volume15
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No4-9
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Abstract:
Hogan (1993) has proposed a version of marginal cost pricing for electricity transmission transactions that include a component for reactive power to support voltage at demand nodes. His examples support the notion that the cost of satisfying voltage constraints can be quite high. We show that in his simplest example the price on this constraint results from an uneconomic and artificial characterization of the problem, namely an inefficient and unnecessarily constrained dispatch. By eliminating this characterization, the price of reactive power falls to a very modest level. Our counterexample has implications for the institutional arrangements under which transmission pricing reform will take place. We believe that environment will be an open access competitive setting, where dispatch is still controlled by one group of participants. Manipulation of marginal transmission costs becomes quite feasible in complex networks through subtle changes to dispatch. Therefore an open access regime using marginal cost pricing must involve either some kind of monitoring and audit function to detect potential abuses, or alternatively, institutional restructuring to eliminate conflicts of interest.



The Competitive Effects of Ownership of Financial Transmission Rights in a Deregulated Electricity Industry

Manho Joung, Ross Baldick, and You Seok Son

Year: 2008
Volume: Volume 29
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No2-9
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Abstract:
In this paper, we investigate how generators� ownership of financial transmission rights (FTRs) may influence the effects of the transmission lines on competition. In order for concrete analysis, a simple symmetric market model is introduced and FTRs are modeled in two different forms: FTR options and FTR obligations. This paper shows that introducing FTRs in an appropriate manner may reduce the physical capacity needed for the full benefits of competition. Among the competitive effects of ownership of FTRs, we focus on the effects on two possible pure strategy equilibria: the unconstrained Cournot equilibrium and the passive/aggressive equilibrium. We also analyze an extension of the model: asymmetric markets. Finally, a numerical illustration of applying the analysis is presented.





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