Renewable Energy and Transmission Networks - Green Energy and Efficiency: An Economic Perspective - page 369

2.1 Institutional Setting Adapted to the Integration of RES
Generation in Several Areas of a Region

Installing and operating the most ef cient RES generation that may possibly exist in

a vast region requires building a signi cant amount of transmission capacity to be

used by power exchanges among areas in this region. This, in turn, requires
planning and managing centrally, in a closely integrated way, the expansion of the
grid, since the bene ts produced by many of the required network reinforcements

are not perceived by local network users but by those located in far away parts of
the regional system. In other words, the entities in charge of identifying and
approving the required network investment projects must jointly consider the

bene ts (both positive and negative) perceived by all agents in the region. This

signi cantly conditions the nature of entities leading the expansion of the network.

But besides this, the responsibilities and interplay between parties throughout this
process will need to be reconsidered as well.
Previous publications on the institutional setting of the development of the
network, see [ 20 , 25 ], point out that, due to the lumpiness of network investments
and the economies of scale characterizing these investments, congestion rents
corresponding to most required new lines do not suf ce to pay their cost. If left

entirely to the private initiative, the congestion rents of any new line would be
maximized for a size of this investment well below the socially optimal one. Then,
in general, private merchant promoters cannot be trusted to build all necessary
reinforcements. Moreover, since the bene

ts associated with any investment are
frequently perceived by a multiplicity of network users, establishing a consortium of
bene cult task.

In a context dominated by conventional generation, most local systems existing
in a region (each one controlled by a single Transmission System Operator, TSO)
have more than enough generation capacity to supply their load. Thus, even when
there may be economic reasons for large power exchanges to take place among
these systems, the former have traditionally been very modest. Consequently,
planning the expansion of the grid could, for its most part, take place separately
within each system. However, when power produced by RES generation located
predominantly in some systems must be used to supply load in others, transmission
reinforcements needed to host the corresponding

ciaries interested in promoting and paying future lines is a very dif

t several of them.
This may require the existence of regional institutions to identify, promote and
approve these reinforcements, or an unusually strong level of inter-system coor-
dination in decision-making. Therefore, for their most part, new transmission assets
of regional signi

ows will bene

cance have to be built as regulated investments, being part of a
regional network expansion plan centrally designed and approved.
This involves that, instead of having a regional expansion plan that results from
adding up investment projects identi

ed and approved separately by each SO and
local planning authority with jurisdiction over each area within the region, there is a
need for a unique SO, or regional network expansion planning entity, to compute
the expansion plan in the rst place, and a single authority to nally approve each