The economic value of transmission lines and the implications for planning models

Alberto Lamadrid, Surin Maneevitjit and Timothy D. Mount

Energy Economics, 2016, vol. 57, issue C, 1-15

Abstract: Many connections between economic efficiency, regulation, the environment and energy markets are evident in the planning for transmission upgrades in an electricity network. Transmission owners have to make decisions about investing in new assets while facing uncertainty in the generation plans, regulatory and environmental constraints, and current system endowments. In this paper, we demonstrate an analytical method for determining the economic value of individual transmission lines in a meshed network by calculating the total welfare effects for the system. While many regulators believe that traditional congestion rents provide the correct incentives for investing in transmission upgrades, we show that the uncertainty in system conditions breaks down this paradigm. The analysis uses an existing Security Constrained Optimal Power Flow (SCOPF) model and a test network to demonstrate how the method can be used to determine the welfare effects of changing the capacity of selected transmission lines. The results show that a substantial portion of the economic benefits for an individual line may come from maintaining system reliability when equipment failures occur. Furthermore, these benefits can change dramatically when inherently intermittent sources of renewable generation are added to a network, and the changes in benefits are not captured effectively by changes in the expected congestion rents.

Keywords: Reliability; Wind; Security Constrained OPF; Value of Lost Load (VOLL); Adequacy; Congestion rents (search for similar items in EconPapers)
JEL-codes: C63 L94 Q48 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988316300536
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:57:y:2016:i:c:p:1-15

DOI: 10.1016/j.eneco.2016.03.015

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().