Tropics on Electricity Transmission Pricing

The efficiency of the power market is heavily affected by the operation and pricing of the transmission system and the topic of this thesis concerns the interaction of the transmission network and the energy markets. After describing different power flow models, we provide an overview of models developed to efficiently coordinate the allocation of transmission resources. The focus is mainly on short-term efficiency, and the survey is only partial, but provides an integrated overview of some of the theoretical models most frequently cited in the literature. An overview of the Norwegian transmission system is given, and we describe the tariff structure, which applies in the central high voltage grid. The implementation of short run marginal cost pricing is studied. More specifically, charges for marginal losses and zonal pricing are examined. Loop flow induces seemingly paradoxical situations in power transmission. We show that a new line may reduce social surplus, and we study the competitive effects of a new line. Throughout, the findings are illustrated by means of simple examples. This is to enhance readability and intuition.