Renewable Energy and Transmission Networks - Green Energy and Efficiency: An Economic Perspective - page 382

4.3 Computation of Transmission Charges Once and for All

Transmission network charges for new network users should be computed before
the latter are installed and should not be updated, or at least not for a reasonably
long time. This is the only way to send the reliable economic locational signals that
investors need to take into account to choose the most convenient sites with a low

nancial risk. This is of particular interest for wind and solar generators, which may
be installed in many sites.
Locational signals are meant to encourage potential new generators to be placed
at convenient locations from the transmission network viewpoint, i.e., where the
presence of the new generator will reduce (or, at least, not increase) the need for
network reinforcements. Transmission charges may also affect the retirement

decision of old plants with scant pro cant impact is expected

on the siting decisions of consumers, since transmission charges are a minor part of
the total electricity costs they bear, which normally is not a major ingredient of the
consumers

t margins. No signi

budget.
Given that no locational impact is possible for new generation investments once
they are into the construction period or in operation, when a new generator requests
connection to a certain point of the grid, the System Operator should inform him of
the transmission charges to be levied on him for the next 10 years (or a similar

'

gure). Due to the uncertainty surrounding most of the major factors that affect the
pro rst 10 years of operation

should be enough for the investor to decide whether to build the new generator in a
certain place or not. Additional information acquired by the TSO/SO during year T
should not be re

tability of power plants, having certainty over the

ected in charges to be paid in the following 10 years by users
installed in T, but could be used to update the trajectory of network charges that will
be announced at the beginning of year T + 1 and applied to any new entrants.
The existence of large amounts of RES generation will make it more dif

cult to
predict conditions applying in the future, as it is the case of economic dispatch.
Then, due to the inability to appropriately predict network use, transmission tariffs
computed ex-ante will be less ef cient than in the case where RES penetration is

lower, since they will be less likely to reproduce future system conditions; on the
other hand, updating network charges periodically defeats their main purpose of
sending credible locational signals to prospective investors.

4.4 Format of Transmission Charges

The choice of format for the transmission charges has implications on the short- and
long-term behavior of the agents of the market. For instance, a volumetric trans-
mission charge (

/MWh) to generators becomes an additional component of their
variable production costs, therefore distorting the economic dispatch of generation,
since it introduces a spurious component in the variable costs. On the other hand, a

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