Optimal transmission switching: economic efficiency and market implications

Traditionally, transmission assets for bulk power flow in the electric grid have been modeled as fixed assets in the short run, except during times of forced outages or maintenance. This traditional view does not permit reconfiguration of the transmission grid by the system operators to improve system performance and economic efficiency. The current push to create a smarter grid has brought to the forefront the possibility of co-optimizing generation along with the network topology by incorporating the control of transmission assets within the economic dispatch formulations. Unfortunately, even though such co-optimization improves the social welfare, it may be incompatible with prevailing market design practices since it can create winners and losers among market participants and it has unpredictable distributional consequences in the energy market and in the financial transmission rights (FTR) market. In this paper, we first provide an overview of recent research on optimal transmission switching, which demonstrates the substantial economic benefit that is possible even while satisfying standard N−1 reliability requirements. We then discuss various market implications resulting from co-optimizing the network topology with generation and we examine how transmission switching may affect locational Marginal Prices (LMPs), i.e., energy prices, and revenue adequacy in the FTR market when FTR settlements are financed by congestion revenues.     

The efficacy and efforts of interest groups in post elections policy formation

This paper presents a new model of interest groups and policy formation in the legislature. In our setting, the already given party ideological predispositions and power distribution determine the expected policy outcome. Our analysis applies to the case of un-enforced or enforced party discipline as well as to two-party and multi-party (proportional representation) electoral systems. The interest groups’ objective is to influence the outcome in their favor by engaging in a contest that determines the final decision in the legislature. Our first result clarifies how the success of an interest group hinges on the dominance of its ideologically closer party and, in general, the coalition/opposition blocks of parties under un-enforced party or coalition/opposition discipline. Such dominance is defined in terms of ideological inclination weighted by power. Our second result clarifies how the success of an interest group hinges on the dominance of its ideology in the ruling coalition (party) in a majoritarian system with enforced coalition (party) discipline. We then clarify under what condition an interest group prefers to direct its lobbying efforts to two parties or the two coalition and opposition blocks of parties under un-enforced discipline rather than to the members of the ruling coalition (party) under enforced discipline. The lobbying efforts under un-enforced and enforced party discipline are also compared. Finally, we clarify the effect of ideological predispositions and power on the efforts of the interest groups.     

Selective incentives and intragroup heterogeneity in collective contests

A group taking part in a contest has to confront the collective action problem among its members, and devices of selective incentives are possible means of resolution. We argue that heterogeneous prize‐valuations in a competing group normally prevent effective use of such selective incentives. To substantiate this claim, we adopt cost‐sharing as a means of incentivizing the individual group members. We confirm that homogeneous prize valuations within a group result in a cost‐sharing rule inducing the first‐best individual contributions. As long as the cost‐sharing rule is dependent only on the members’ contributions, however, such a first‐best rule does not exist for a group with intragroup heterogeneity. Our main result clarifies how unequal prize valuations affect the cost‐sharing rule and, in particular, the degree of cost‐sharing. If the relative rate of change of the marginal effort costs is decreasing, it is reduced by intragroup heterogeneity. If the rate is increasing, the cost is fully shared, but it cannot induce the first‐best contributions for the group.