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Transmission augmentation with mathematical modelling of market power and strategic generation expansion. Part 1

This paper proposes a new mathematical structure for evaluating the economic efficiency of transmission investment in a liberalized electricity market. The problem faced by a transmission planner is modeled using the concept of social welfare from economics. The behavior of generators is modeled as the Nash equilibrium of a strategic game. The Nash solution concept is reformulated as an optimization problem and a new concept—the Stackelberg-Worst Nash equilibrium—is introduced to resolve the problem of multiple equilibria. The proposed structure can take into account the effects of a transmission augmentation on both market power and strategic generation investment. Accordingly,the optimal solution to the transmission planner’s problem may allow additional transmission capacity both to reduce market power and to defer investment in the generation sector. A methodology is proposed to decompose the benefits of a transmission augmentation policy into the efficiency benefit, competition benefit, and the deferral benefit. The outcomes of the proposed approach to transmission augmentation are compared with the outcomes of two other approaches to transmission augmentation using a simple three-bus network example.

History

Volume

26

Issue

4

Start Page

2040

End Page

2048

Number of Pages

9

ISSN

0885-8950

Location

United States

Publisher

Institute of Electrical and Electronics Engineers

Language

en-aus

Peer Reviewed

Yes

Open Access

No

Era Eligible

Yes

Journal

IEEE Transactions on Power Systems