The New Zealand Electricity Authority is considering a number of transmission charging proposals. Ideally such charges should not alter incentives in the spot market, but maximum-demand charges have led to some electricity purchasers avoiding charges by shifting load. Flow-based charges discourage such behaviour but distort short-run behaviour in different ways. We discuss the advantages and disadvantages of peak transmission charges and flow-based transmission charges and describe a model that might be used to find the best combination of these. (joint work with K. Ruddell and A. Downward)
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