سرمایه گذاری بلند مدت در برق: تجارت کردن بین هماهنگی و رقابت؟

The purpose of this paper is to survey the theoretical debate and the practical problems of long-term investment in electricity. It discusses fundamental aspects of investment in electricity such as the interdependencies between generation and grid investment, free-riding problems, and the investment signals of different network access regimes. Especially, the externalities that are created by the nature of electric flows pose severe problems for investment decisions. The way these externalities are internalised in the pricing scheme strongly influences where rents are collected and investment is profitable. Besides, the handling of the loop-flow phenomenon is crucial for the trade-off between co-ordination and competition in long-term investment in electricity.

During the summer of 2003, the public focus concentrated on the need for investment in new transmission and generation assets. The question was raised whether deregulated electricity markets could create sufficient investment incentives. In this paper, we discuss the possible trade-off between co-ordination and competition that might arise with the opening of the electricity markets. On the one hand, in order to introduce competition, a once fully vertically integrated industry was vertically separated into competitive elements (generation and sales) and regulated monopolistic elements (transmission and distribution). On the other hand, following the separation of generation and transmission responsibility, new challenges arose in ensuring co-ordination between the different new entities (power producers, network operators, traders, etc.) to guarantee electricity supply. Different frameworks have been developed in theory and practice to address the problem of interaction between generation and transmission. In a perfect market environment, a pricing mechanism takes over the part of co-ordinating the actions of market participants since this provides the most efficient results. This is, in general, also the case for investment decisions. In the electricity industry, under vertical integration, one utility was able to jointly optimise generation, transmission operation, and investment. After deregulation, the decisions to invest in generation on the one hand and network infrastructure on the other hand are taken by separate firms, rather than one integrated utility. While the integrated structure of the industry—traditionally in combination with a cost-of-service approach to regulation—has favoured over-investment in generation and transmission assets, now the problem of under-investment is discussed. In principal, new grid investment may be undertaken by the established network owner or by third parties (so-called merchant or market-based investment, cf. Joskow and Tirole, 2003). Merchant investors try to profit from scarce capacity between regions by building (DC) lines to skim rents. This paper concentrates on investment in new lines1 and the possibly resulting trade-offs between 1. investment in transmission and in generation, and 2. co-ordination and competition. These topics are linked closely by the transport characteristics of electricity. This makes it more difficult to estimate the “right” amount of investment. In addition to the economic calculation of market participants, a regulatory framework tries to implement general interests such as security of supply and system reliability. Table 1 provides an overview of the problems connected with long-term investment in electricity. Given the overview in Table 1, this paper focuses on market design and price mechanisms and their inherent investment signals. It neither explores the effect of a single regulatory mechanism as a revenue or price cap on investment incentives nor discusses the possible demand for security of supply which might enter the investment level (cf. Wild and Vaterlaus, 2003).The contribution concentrates on investment in generation assets and transmission networks analysing information and co-ordination needs and what might be left to competition. Its primary aim is to explain the technical problems of transmitting electricity and their implications for investment decisions. Secondarily, transmission pricing mechanisms and the resulting investment-incentive schemes are presented. The paper is organised as follows. With Section 2, possible impediments to transmission investment, especially the trade-off between generation and transmission investment, is analysed. Section 3 explains different effects on investment incentives of a usage fee aiming at short run efficiency. With the market design and especially the pricing mechanisms, long-term investment signals should be provided. This focuses on the trade-off between co-ordinating elements in the market regime and competitive ones building primarily on pricing mechanisms. Section 4 concludes.

The trade-off between co-ordination and competition in long-term investment in electricity constitutes a long-term problem in itself: “A significant research challenge is to design regulatory mechanisms for system operators and incumbent transmission owners and a better framework for defining transmission property rights that will stimulate efficient investment by regulated incumbent transmission owners and by merchant entrants responding to market opportunities when they are the most efficient suppliers” (Joskow and Tirole, 2003: p. 1). Leaving the construction of new lines to merchant investments alone, needs a very sophisticated pricing mechanism with long-term rights, which might be too complicated to implement. The characteristics of transmission and interdependencies present opportunities and risks to all participants. In the face of transaction cost and imperfect information, it might be better to choose an approach involving some co-ordination (e.g. a co-ordination group of all parties involved) instead of too much reliance on the market. Furthermore, to exclude free-rider problems and information lacks, a certain degree of co-ordination is in conformity with the interests of all parties involved. Given the market regime, it should be discussed how a co-ordinating institution might be established and what competencies and tasks it should have. An example for the organisation of such a group is provided by the Regional Transmission Expanding Planning Process within the network of PJM (cf. PJM, 2003).