Financial Transmission Rights in Electricity Markets

In this paper, Financial Transmission Rights (FTRs) are introduced. First, the basics of FTRs are presented; second, different markets of FTRs are described, namely: i) one-period, ii) multi-period and iii) multi-round, for both forwards and options. Finally, the interaction of FTRs and strategic bidding of generators is studied. It is shown how FTRs can exacerbate market power. Based on a DC-network approximation, a three- node system is used for illustrative purposes.