Environmental Engineering Reference
In-Depth Information
wind or solar resources, regardless of their location and impact on transmission
costs, which is inef
cient. Additionally, spreading costs too widely reduces cost
discipline and eliminates the incentive to consider economic alternatives to trans-
mission expansion, since socializing the costs of these alternatives would call for
signi
cant changes in decision-making in the electric system and put many
important investment decisions into the hands of regulators. Finally, uniform unit
charges may raise the opposition to bene
cial investments by parties forced to
shoulder costs that signi
ts they realize.
Socialization may produce a similar cost allocation to the application of the
bene
cantly exceed the bene
ciary-pays principle when much uncertainty exists in the estimation of ben-
e
ciaries. This may be the case of reliability driven investments. Great uncertainty
about bene
ts and bene
ciaries generally implies that expected bene
ts are widely
distributed. However, results of allocation to bene
ciaries are still different from
cost socialization in the more common cases where signi
cant uncertainty about
some bene
ciaries is accompanied by less uncertainty about others.
In liberalized markets both generation and load generally bene
t from new
transmission capacity. Generators make pro
ts from using the transmission system
to deliver their product to other parts of the system and should therefore pay a
fraction of the network costs. Load also bene
ts from new transmission through
reduced energy prices, increased reliability, or both. Cost-allocation procedures
should split costs of a line between generation and load proportionally to the
aggregate economic bene
ts realized by the two groups. If wholesale markets are
highly competitive and there is no generator that can capture extra rents, all costs
levied on generators end up being passed on to load via wholesale electricity prices,
either in the short or in the long term. This occurs even if network charges are
levied as an annual lump sum or on a per megawatt basis rather than per megawatt-
hour of produced energy. However, some generators enjoy unique advantages
speci
c to their location or perhaps some special access to cheap fuel resources;
many others do not operate in highly competitive environments. Under any of these
two circumstances, generators can be charged transmission costs without any
anticipated pass-through to consumers.
Undesirable consequences of the allocation of the costs of new lines according to
other criteria than the bene
ts they produce include, for instance, abandoning
socially bene
cial investments in generation when the cost of long connection lines
is charged 100 % to the generators involved, or eliminating locational signals to
generators if too much of the transmission cost is allocated to load. The latter is
especially harmful for RES generation that requires costly transmission invest-
ments. Locational signals to generators help to ensure that the most ef
cient sites
from a system economic point of view are chosen for generator development.
Despite creating inef
ciencies, generators are, at least initially, responsible for the
entire cost of radial interconnection lines in many systems, while load entirely bears
the cost of other network reinforcements.
Any transmission planning exercise should look for investments with the largest
margin of resulting bene
ts (or reduction in system costs) over network costs. A
sound planning process must provide suf
cient information on the identities of the
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