Sustainable Transmission Planning in Imperfectly Competitive Electricity Industries: Balancing Economic and Environmental Outcomes

Afzal Siddiqui, Makoto Tanaka, Yihsu Chen

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We explore the role of a transmission system operator (TSO) that builds a transmission line to accommodate renewable energy in order to lower emissions as required by government policy. In contrast to central planning, a TSO in a deregulated electricity industry can only indirectly influence outcomes through its choice of the transmission line capacity. Via a bi-level model, we show that this results in less transmission capacity and with limited emissions control in a perfectly competitive industry vis-à-vis a benchmark centrally planned system. A carbon charge on industry that fully accounts for the cost of pollution damage leads to a perfect alignment of incentives and maximised social welfare only under perfect competition. By contrast, a carbon charge may actually lower social welfare under a Cournot oligopoly as the resulting reduction in consumption facilitates the further exercise of market power.
Original languageEnglish
Pages (from-to)208-223
JournalEuropean Journal of Operational Research
Volume275
Issue number1
DOIs
Publication statusPublished - 2019
MoE publication typeA1 Journal article-refereed

Fingerprint Dive into the research topics of 'Sustainable Transmission Planning in Imperfectly Competitive Electricity Industries: Balancing Economic and Environmental Outcomes'. Together they form a unique fingerprint.

Cite this