A Nash Approach to Planning Merchant Transmission for Renewable Resource Integration

Qun Zhou, Leigh Tesfatsion (), Chen-Ching Liu, Ron F. Chu and Wei Sun

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Major transmission projects are needed to integrate and to deliver renewable energy (RE) resources. Cost recovery is a serious impediment to transmission investment. A negotiation methodology is developed in this study to guide transmission investment for RE integration. Built on Nash bargaining theory, the methodology models a negotiation between an RE generation company and a transmission company for the cost sharing and recovery of a new transmission line permitting delivery of RE to the grid. Findings from a six-bus test case suggest that RE subsidies can be effectively used to achieve system optimality when RE prices are fixed through bilateral contracts but have limited ability to achieve system optimality when RE prices are determined through locational marginal pricing. This limitation needs to be recognized in the design of RE subsidies.

Keywords: Renewable Energy; transmission investment; Nash bargaining theory; cost sharing (search for similar items in EconPapers)
JEL-codes: C7 Q2 Q4 (search for similar items in EconPapers)
Date: 2013-08-01
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Citations: View citations in EconPapers (2)

Published in IEEE Transactions on Power Systems, August 2013, vol. 28 no. 3, pp. 2086-2100

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