  We consider a zonal international power market and investigate potential
economic incentives for short-term reductions of transmission capacities on
existing interconnectors by the responsible transmission system operators
(TSOs). We show that if a TSO aims to maximize domestic total welfare, it often
has an incentive to reduce the capacity on the interconnectors to neighboring
countries.
  In contrast with the (limited) literature on this subject, which focuses on
incentives through the avoidance of future balancing costs, we show that
incentives can exist even if one ignores balancing and focuses solely on
welfare gains in the day-ahead market itself. Our analysis consists of two
parts. In the first part, we develop an analytical framework that explains why
these incentives exist. In particular, we distinguish two mechanisms: one based
on price differences with neighboring countries and one based on the domestic
electricity price. In the second part, we perform numerical experiments using a
model of the Northern-European power system, focusing on the Danish TSO. In 97%
of the historical hours tested, we indeed observe economic incentives for
capacity reductions, leading to significant welfare gains for Denmark and
welfare losses for the system as a whole. We show that the potential for
welfare gains greatly depends on the ability of the TSO to adapt interconnector
capacities to short-term market conditions. Finally, we explore the extent to
which the recently introduced European "70%-rule" can mitigate the incentives
for capacity reductions and their welfare effects.
