Electricity (and Natural Gas) Transmission under Transformation - An Introduction

There may exist various factors that could potentially hinder the efficient development of electricity markets, such as poorly defined property rights, incomplete markets, increasing trade of electricity among different control areas, inefficient operation, and maintenance, as well as bottlenecks in transmission capacity due to lack of investment for grid expansion. Regarding the latter, different authors have broadened and deepened the analysis recently, designing a range of mechanisms for optimal electricity transmission enhancement.1 The aim has been to understand the different determinants of optimal network pricing—along with the corresponding allocation of costs and benefits among different types of consumers—and the adequate regulation of transmission grids to foster expansion. These analyses have gained relevance, both in theory and practice, due to liberalization processes in various electricity systems that prioritize unbundling of electricity generation and transmission, and that eventually also rely on independent system operators (ISOs).