### Abstract

It is possible to distinguish three types of benefits from a transmission network augmentation: the benefits of more efficient dispatch (the "efficiency benefit"), the benefits from enhanced system reliability (the "reliability benefit") and the benefits of a reduction in market power (the "competition benefit"). In the Australian National Electricity Market, NEM, the "competition benefit" of additional transmission capacity has not, in practice, been explicitly assessed. In the future, however, it is possible that generator market power in some markets will increase. Consequently, it is timely and important to develop a workable mechanism to model and calculate the competition benefit of additional transmission capacity within the current NEM rules. In this paper, we propose a new mathematical structure for market-based augmentation of the transmission system, which can capture both the efficiency benefit and competition benefit of the transmission capacity. The Nash solution concept is employed to model the price-quantity game among Generating Companies, GenCos. The multiple Nash equilibria of the game are located by reformulating the Nash solution concept as an optimisation problem. The "worst" Nash equilibrium is used to assess the competition benefit of the transmission augmentation. The worst Nash equilibrium is the equilibrium which maximises the social cost, i.e. the sum of total generation cost and the total value of unserved energy. Thorough analysis of the modified Garver's example system is presented to clearly highlight the implications of the derived mathematical structure from different perspectives.

Original language | English |
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Title of host publication | 43rd International Conference on Large High Voltage Electric Systems 2010, CIGRE 2010 |

Publication status | Published - 2010 |

Event | 43rd International Conference on Large High Voltage Electric Systems 2010, CIGRE 2010 - Paris, France Duration: Aug 22 2010 → Aug 27 2010 |

### Other

Other | 43rd International Conference on Large High Voltage Electric Systems 2010, CIGRE 2010 |
---|---|

Country | France |

City | Paris |

Period | 8/22/10 → 8/27/10 |

### Fingerprint

### Keywords

- Competition benefit
- Economic-based transmission augmentation
- Game theory
- Optimisation
- Power system planning

### ASJC Scopus subject areas

- Electrical and Electronic Engineering

### Cite this

*43rd International Conference on Large High Voltage Electric Systems 2010, CIGRE 2010*

**A mathematical structure for the assessment of transmission system augmentation in the Australian National Electricity Market.** / Hosseinzadeh, N.; Hesamzadeh, M. R.; Biggar, D. R.

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution

*43rd International Conference on Large High Voltage Electric Systems 2010, CIGRE 2010.*43rd International Conference on Large High Voltage Electric Systems 2010, CIGRE 2010, Paris, France, 8/22/10.

}

TY - GEN

T1 - A mathematical structure for the assessment of transmission system augmentation in the Australian National Electricity Market

AU - Hosseinzadeh, N.

AU - Hesamzadeh, M. R.

AU - Biggar, D. R.

PY - 2010

Y1 - 2010

N2 - It is possible to distinguish three types of benefits from a transmission network augmentation: the benefits of more efficient dispatch (the "efficiency benefit"), the benefits from enhanced system reliability (the "reliability benefit") and the benefits of a reduction in market power (the "competition benefit"). In the Australian National Electricity Market, NEM, the "competition benefit" of additional transmission capacity has not, in practice, been explicitly assessed. In the future, however, it is possible that generator market power in some markets will increase. Consequently, it is timely and important to develop a workable mechanism to model and calculate the competition benefit of additional transmission capacity within the current NEM rules. In this paper, we propose a new mathematical structure for market-based augmentation of the transmission system, which can capture both the efficiency benefit and competition benefit of the transmission capacity. The Nash solution concept is employed to model the price-quantity game among Generating Companies, GenCos. The multiple Nash equilibria of the game are located by reformulating the Nash solution concept as an optimisation problem. The "worst" Nash equilibrium is used to assess the competition benefit of the transmission augmentation. The worst Nash equilibrium is the equilibrium which maximises the social cost, i.e. the sum of total generation cost and the total value of unserved energy. Thorough analysis of the modified Garver's example system is presented to clearly highlight the implications of the derived mathematical structure from different perspectives.

AB - It is possible to distinguish three types of benefits from a transmission network augmentation: the benefits of more efficient dispatch (the "efficiency benefit"), the benefits from enhanced system reliability (the "reliability benefit") and the benefits of a reduction in market power (the "competition benefit"). In the Australian National Electricity Market, NEM, the "competition benefit" of additional transmission capacity has not, in practice, been explicitly assessed. In the future, however, it is possible that generator market power in some markets will increase. Consequently, it is timely and important to develop a workable mechanism to model and calculate the competition benefit of additional transmission capacity within the current NEM rules. In this paper, we propose a new mathematical structure for market-based augmentation of the transmission system, which can capture both the efficiency benefit and competition benefit of the transmission capacity. The Nash solution concept is employed to model the price-quantity game among Generating Companies, GenCos. The multiple Nash equilibria of the game are located by reformulating the Nash solution concept as an optimisation problem. The "worst" Nash equilibrium is used to assess the competition benefit of the transmission augmentation. The worst Nash equilibrium is the equilibrium which maximises the social cost, i.e. the sum of total generation cost and the total value of unserved energy. Thorough analysis of the modified Garver's example system is presented to clearly highlight the implications of the derived mathematical structure from different perspectives.

KW - Competition benefit

KW - Economic-based transmission augmentation

KW - Game theory

KW - Optimisation

KW - Power system planning

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M3 - Conference contribution

AN - SCOPUS:84876747700

BT - 43rd International Conference on Large High Voltage Electric Systems 2010, CIGRE 2010

ER -