Power Flows: Transmission Lines, Allocative Efficiency, and Corporate Profits
American Economic Review · 2025 · Volume 115 · Issue 8
Abstract
Accelerated investment in electricity transmission could reduce total costs and enhance renewable integration. I document static allocative inefficiencies induced by incomplete market integration in 2 major US markets; these have risen over time and totaled $2 billion in 2022. I also argue that estimating firm-level impacts is important, as incumbents may have the power to block new lines and other reforms. I show that 4 firms would have experienced a collective $1.3 billion drop in net revenues in 2022 had the market been integrated, and there are reports of some of these firms blocking transmission projects.
Keywords
Firm Behavior: Empirical Analysis, Production, Cost, Capital, Total Factor, and Multifactor Productivity, Capacity, Oligopoly and Other Imperfect Markets, Electric Utilities, Alternative Energy Sources, Energy: Government Policy
Enable JavaScript for citation tools and additional paper interactions.