A bi-level formulation of transmission planning problem in liberalised electricity markets

This paper sets out an alternative formulation for transmission planning in liberalised electricity markets. The formulation follows the concept of the leader-follower game in applied mathematics. In this new formulation, the transmission network service provider acts as the leader of the game and the electricity market operator acts as the follower of the game. Using this new formulation, the transmission network service provider can measure the impact of additional transmission capacity on nodal (or regional) market prices. This allows the transmission network service provider to implicitly model the competitive effect of additional transmission capacity in its investment decisions. A metric termed L-Shape Area is developed to measure the deviation of market prices from the competitive ones. The alternative formulation is a bi-level optimisation problem.To solve this problem, the inner optimisation problem is replaced by its equivalent Karush-Kuhn-Tucker optimality conditions. The result is a non-linear programming problem that is solved using a gradient search method. IEEE 14-bus example system is used for numerical studies.