A Nash Approach to Planning Merchant Transmission for Renewable Resource Integration

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

ISU General Staff Papers 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 demonstrate the Pareto efficiency of the approach as well as its fairness, in that it is consistent with one commonly used definition of fairness in cooperative games, the Nash cooperative solution. Hence, the approach could potentially be used as a guideline for RE investors. The study also discusses the possibility of using RE subsidies to steer the negotiated solution towards a system-optimal transmission plan that maximizes total net benefits for all market participants. The findings 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.

Date: 2013-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://dr.lib.iastate.edu/server/api/core/bitstre ... 7151dd5d83de/content
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Working Paper: A Nash Approach to Planning Merchant Transmission for Renewable Resource Integration (2013)
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:isu:genstf:201301010800001469

Access Statistics for this paper

More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().