Renewable Energy and Transmission Networks - Green Energy and Efficiency: An Economic Perspective - page 372

SO and new generation owners. Speci c methods — such as feed-in-tariffs or green

certi can be used to encourage investment in RES generation. However,

this alone will not suf

cates —

ce to provide a shield against volatility in revenues to RES-
based generation located in far away areas that are not strongly connected to the rest
of the system, where most of its power output will be consumed. Ensuring the
ability of these generators to be pro table requires providing them with guaranteed

access to the transmission capacity needed to transport their power output from
where they are located to major load centers. This calls for the deployment of
transmission capacity mechanisms where these generators can buy well ahead of
time the right to use the transmission capacity they may need.
However, issuing rights over transmission capacity may condition the future
needs of this capacity. Transmission rights issued in the long term may have an
impact in the operation time frame, whether with physical rights, and therefore their
owners have the right to physically access the grid, or with

nancial rights, and
therefore congestion rents accrue to the right holders. However, given the long-term
nature of transmission right auctions, much of the capacity allocated to agents
through long-term contracts may not have been built at the time these agents buy it.
Hence, demand for long-term transmission contracts must be considered jointly
with best estimates of the future location and operation pro le of other generation

and load to compute the optimal development of the grid.
The features of transmission rights may condition the need for transmission
capacity. Thus, transmission capacity to be built will be smaller if rights are de

ned
as obligations to use the transmission capacity they refer to instead of options,
which would entail the right owners to use this capacity, or earn the corresponding
congestion rents, only if this suits them. If rights are de ned as options, there will

be more uncertainty about the eventual use that right holders will make of the
transmission grid, or the congestion rents they will be entitled to. Other features of
transmission rights may also impact the construction of transmission capacity, like,
for example, whether rights refer to the capacity needed to inject power at a certain
point of the system and withdraw it at another one, i.e. whether they are de ned as

point-to-point rights, or instead they refer to the capacity of speci ned

bottlenecks to be reinforced. A review of different possible formats of congestion
rights, and their impact on the ef

c prede

ciency of the system, can be found in [ 1 , 20 , 23 ].
The need to allocate transmission contracts to part of new RES generators and
conventional ones in the long term, and the impact that the allocation of rights will
have on the pro

tability of the generation projects themselves and the need of new
transmission capacity, advices not to decide separately on the development of this
generation and the grid, but instead to call joint generation and transmission
capacity auctions. In these auctions, agents would submit bids on the prize at the
connection node that they would like to sell their output at. Then, the central system
planner would determine, taking into account the prize they would be paying for
this electricity and his best estimates of the output pro le of this generators under

existing system conditions, which of these bids to accept.
This issue has been discussed, among others, in studies analyzing the integration
of Europe with other peripheral regions, where RES-based primary energy sources