Proactive transmission investment in competitive power systems
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Date
2006
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Publisher
IEEE
Abstract
We formulate a three-period model for studying how the exercise of local market power by generation firms affects the equilibrium investment between the generation and the transmission sectors. Using a 30-bus network example, we compare the transmission investment decisions made by a "proactive" network planner (who proactively plans transmission investments to induce a more socia By -efficient equilibrium of generation investments) with both those made by an integrated-resources planner (who jointly plans generation and transmission expansions) and those made by a "reactive' network planner (who plans transmission investments only considering the currently installed generation capacities). We show that, although a proactive network planner cannot do better (in terms of social welfare) than an integrated -resources planner, it can recoup some of the lost welfare due to the separation of generation and transmission planning by proactively expanding transmission capacity. Conversely, a reactive network planner, who ignores the interrelationship between the transmission and the generation investments, foregoes this opportunity.
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Keywords
Cournot-Nash equilibrium, market power, mathematical programming, mathematical program with equilibrium constraints, network expansion planning, power system economics, MARKET POWER, RIGHTS, NETWORKS