TY - GEN
T1 - Considerations for Economic Regulation Amendments to Incentivize Flexibility Utilization in the Finnish Transmission System
AU - Kuusela, Antti
AU - Reilander, Antero
AU - Peltoketo, Suvi
AU - Nikkilä, Antti-Juhani
AU - Järventausta, Pertti
N1 - Funding Information:
ACKNOWLEDGEMENT This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 957739.
Funding Information:
This project has received funding from the European Union’s Horizon
Funding Information:
This project has received funding from the European Union's Horizon 2020 research and innovation programme under grant agreement No 957739.
Publisher Copyright:
© 2023 IEEE.
PY - 2023
Y1 - 2023
N2 - This paper provides considerations for economic regulation amendments to incentivize flexibility utilization in the Finnish transmission system. An investment deferral shall produce higher economic efficiency if the incurred costs of flexibility utilization are lower than the costs of a comparable investment during the evaluation period while the increase of service output remains the same. The analysis in this paper evaluates costs and benefits for a transmission system operator, connecting party and society in the regulatory regime applied in Finland. Incentives for flexibility utilization are missing from the current revenue capped rate of return regulation. The analysis results show that beneficiaries of flexibility utilization in the current regulation are the society and connecting party while TSO's efforts to defer an investment would have negative economic impact on its profit. Therefore, amendments to the economic regulation methodology are proposed to incentivize flexibility utilization when total welfare is increased.
AB - This paper provides considerations for economic regulation amendments to incentivize flexibility utilization in the Finnish transmission system. An investment deferral shall produce higher economic efficiency if the incurred costs of flexibility utilization are lower than the costs of a comparable investment during the evaluation period while the increase of service output remains the same. The analysis in this paper evaluates costs and benefits for a transmission system operator, connecting party and society in the regulatory regime applied in Finland. Incentives for flexibility utilization are missing from the current revenue capped rate of return regulation. The analysis results show that beneficiaries of flexibility utilization in the current regulation are the society and connecting party while TSO's efforts to defer an investment would have negative economic impact on its profit. Therefore, amendments to the economic regulation methodology are proposed to incentivize flexibility utilization when total welfare is increased.
KW - congestion management
KW - economic regulation
KW - flexibility incentive
KW - investment deferral
KW - on-demand flexibility
U2 - 10.1109/EEM58374.2023.10161867
DO - 10.1109/EEM58374.2023.10161867
M3 - Conference contribution
AN - SCOPUS:85165228082
SN - 9798350324525
T3 - International Conference on the European Energy Market
BT - 2023 19th International Conference on the European Energy Market, EEM 2023
PB - IEEE
T2 - International Conference on the European Energy Market
Y2 - 6 June 2023 through 8 June 2023
ER -