TY - JOUR
T1 - Transmission augmentation with mathematical modeling of market power and strategic generation expansion - Part I
AU - Hesamzadeh, Mohammad R.
AU - Biggar, Darryl R.
AU - Hosseinzadeh, Nasser
AU - Wolfs, Peter J.
PY - 2011/11
Y1 - 2011/11
N2 - 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.
AB - 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.
KW - Game theory
KW - Nash equilibria
KW - generation investment
KW - market power
KW - transmission network planning
KW - transmission system augmentation
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U2 - 10.1109/TPWRS.2011.2145008
DO - 10.1109/TPWRS.2011.2145008
M3 - Article
AN - SCOPUS:80054920632
SN - 0885-8950
VL - 26
SP - 2040
EP - 2048
JO - IEEE Transactions on Power Systems
JF - IEEE Transactions on Power Systems
IS - 4
M1 - 5771584
ER -