American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Power Flows: Transmission Lines, Allocative Efficiency, and Corporate Profits
American Economic Review
(pp. 2574–2615)
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.Citation
Hausman, Catherine. 2025. "Power Flows: Transmission Lines, Allocative Efficiency, and Corporate Profits." American Economic Review 115 (8): 2574–2615. DOI: 10.1257/aer.20240276Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- L13 Oligopoly and Other Imperfect Markets
- L94 Electric Utilities
- Q42 Alternative Energy Sources
- Q48 Energy: Government Policy