Power Flows: Transmission Lines, Allocative Efficiency, and Corporate Profits
Catherine Hausman
Abstract
Accelerated investment in electricity transmission could reduce total costs and enhance renewable integration. I document static allocative inefficiencies induced by incomplete market integration in 2 major US markets; these have risen over time and totaled $2 billion in 2022. I also argue that estimating firm-level impacts is important, as incumbents may have the power to block new lines and other reforms. I show that 4 firms would have experienced a collective $1.3 billion drop in net revenues in 2022 had the market been integrated, and there are reports of some of these firms blocking transmission projects. (JEL D22, D24, L13, L94, Q42, Q48)
Topics & Concepts
Allocative efficiencyElectric power transmissionPower (physics)BusinessEconomicsIndustrial organizationTransmission (telecommunications)MicroeconomicsTelecommunicationsElectrical engineeringComputer scienceEngineeringPhysicsQuantum mechanicsElectric Power System OptimizationPower System Reliability and MaintenanceOptimal Power Flow Distribution