Welfare Effects of Electricity Transit

Welfare effects of electricity transit are systematically investigated using welfare maximization models. It can be shown that an optimal allocation can achieved iff marginal costs of electric energy including marginal costs of transit have to be paid by electricity importing companies. Transit countries should be fully compensated for transit costs including capital costs for the capacity required for electricity transit. This could be done by means of border auctions of transit capacity up to the point of sufficient transit capacity.