 Economic externalities in transmission network expansion planningHans Alayo, Marcos J. Rider and Javier Contreras Energy Economics, 2017, vol. 68, issue C, 109-115 Abstract: This paper discusses investing in transmission capacity and its link with investing in generation capacity. Since opportunity costs in transmission and generation capacity are dependent, externalities arise when investment decisions are decentralized. Externalities are market failures which appear when a decision of a particular agent changes another agent's welfare, but not vice versa. When generation and transmission investment decisions are made separately, generation investment introduces negative externalities to transmission planning. A centralized multistage stochastic model is formulated for finding the Pareto optimal solution of investments in transmission and generation capacity. Using the model, we show some examples of externalities in transmission planning for the IEEE 24-bus test system and the Peruvian system. Finally, we found that for the Peruvian system simultaneous optimal planning of generation and transmission capacity gave significant savings, around $585 million, which represents 10% of the total cost. Keywords: Transmission planning; Externalities; Investing in generation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:68:y:2017:i:c:p:109-115 DOI: 10.1016/j.eneco.2017.09.018 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 |
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