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Faculty of Economics

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Newbery, D.

Regulation of access, fees, and investment planning of transmission in Great Britain


Abstract: Liberalized electricity markets require unbundling transmission from generation. For least system cost, generation needs to locate to minimize generation and transmission investment and operation cost. Britain offers a good example of the challenges of and responses to setting transmission access fees to guide the location of massive renewables entry, very differently located to old fossil plants for which the grid was designed. Over-rewarding renewables pre-2014 worked strongly against these location signals, amplifying congestion. Proposals to coordinate transmission and generation off-shore show considerable benefits but coordination needs to be extended on-shore. Partial Locational Marginal Pricing (LMP in the realtime market might deliver less than full LMP but at much lower cost. Modest changes to transmission and auctioned renewables contracts could deliver quick coordination benefits independent of LMP.

Keywords: transmission fees, regulation, off-shore wind, LMP

JEL Codes: D02 D44 H54 L51 L94 Q42

Author links: David Newbery  


EPRG Paper Link: 2307

Open Access Link: