Efficient incentive mechanisms for introduction of renewable resources and development of transmission in deregulated power markets

The main contribution of this project is the analysis of transmission issues associated with current and alternative incentives structures for introduction of renewable generation capacity in the incumbent Nordic electricity system. The suitability of th e existing numerical models for assessing the transmission issues related to the introduction of renewable resources will be evaluated. The most suitable formulation for a numerical analysis of the issues identified in this project will be identified and extended. Model simulations will then be conducted to understand the working of the current incentive structures and test the performance of alternative market and regulatory mechanisms for introduction of renewable resources into the Nordic power market. Work in this project will draw both on the existing literature Sawin (2004) and Butler and Neuhoff (2005) and the empirical information collected through the project partner Statnett SF and Norwegian Water Resources and Energy Directorate (NVE) who activ ely participates in the Council of European Energy Regulators network.