Interconnector economics

This paper explains why the utilization of some interconnectors is sub-optimal. The nature of the benefits that interconnectors can provide and the complexity of estimating them ex ante is first described. Then the two major problems of securing efficient use are examined for a single interconnector linking two separate control areas. One is matching user nominations accepted by both system operators; the other is organising a system of transmission rights which will manage congestion efficiently. Finally, there is a discussion of some proposed methods for dealing with the much more complex problems which arise when several interconnectors provide meshed links between several control areas. (c) 2004 Elsevier Ltd. All rights reserved.