Transmission Asset Investment in Electricity Markets

Abstract

We construct a general analytic framework for the transmission network investment problem in the market environment and demonstrate its application to some test systems. We define a set of metrics to quantify the improvement attained in terms of welfare for all the participants and make use of them in the evaluation of the impacts of new transmission investments under competition. The proposed metrics are useful to the central entity responsible for transmission planning to provide meaningful measures of the effects of a modification in the grid over the planning horizon. The proposed framework is particularly useful to transmission network planners to support desired environmental targets. The analysis of the effects of new investments on the participants affected by the expansion includes the assessment of appropriate environmental attributes. The consistency of the measured values in terms of these metrics allows the comparison of disparate transmission investment projects and their effective prioritization. A key element of the framework is the deployment of an optimization scheme to maximize the social welfare with and without the transmission asset investments under various bidding behaviors of the market players and contracting conditions. We report the application of the proposed framework to investigate several transmission expansion scenarios on the IEEE 24-bus reliability test system network. The results on both pool-based markets and combined pool-bilateral contract markets provide a good illustration of the capability of the framework to effectively address realistic questions in transmission investment.