NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Competitive Effects of Transmission Infrastructure in the Indian Electricity Market

Nicholas Ryan

NBER Working Paper No. 23106
Issued in January 2017
NBER Program(s):   DEV   EEE

India, seeking to reduce electricity shortages, set up a new power market, in which transmission constraints sharply limit trade between regions. I use confidential bidding data to estimate the costs of power supply and simulate market outcomes with more transmission capacity. I find that the returns to building transmission hinge on market conduct. Under a competitive model of supply, transmission investments roughly breakeven. Under a strategic model, the same transmission expansion increases market surplus by 19 percent, enough to justify the investment, because low-cost sellers increase supply in response to a more integrated grid.

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Document Object Identifier (DOI): 10.3386/w23106

 
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