Proactive planning and valuation of transmission investments in restructured electricity markets

Enzo Sauma () and Shmuel Oren ()

Journal of Regulatory Economics, 2006, vol. 30, issue 3, 358-387

Abstract: Traditional methods of evaluating transmission expansions focus on the social impact of the investments based on the current generation stock which may include firm generation expansion plans. In this paper, we evaluate the social welfare implications of transmission investments based on equilibrium models characterizing the competitive interaction among generation firms whose decisions in generation capacity investments and production are affected by both the transmission investments and the congestion management protocols of the transmission system operator. Our analysis shows that both the magnitude of the welfare gains associated with transmission investments and the location of the best transmission expansions may change when the generation expansion response is taken into consideration. We illustrate our results using a 30-bus network example. Copyright Springer Science+Business Media, LLC 2006

Keywords: Cournot–Nash equilibrium; Market power; Mathematical program with equilibrium constraints; Network expansion planning; Power system economics; Proactive network planner; D43; L13; L22; L94 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (121)

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DOI: 10.1007/s11149-006-9012-x

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