If you build it, he will come: Anticipative power transmission planning
Like in the film Field of Dreams, the sentence “if you build it, he will come” also applies in power systems. In this sense, if a transmission planner suggests building some lines in anticipation of generation capacity investments, then it can induce generation companies to invest in a more socially efficient manner. In this paper, we solve for the optimal way of doing this anticipative power transmission planning. Inspired in the proactive transmission planning model proposed by Sauma and Oren (2006) we formulate a mixed integer linear programming optimization model that integrates transmission planning, generation investment, and market operation decisions and propose a methodology to solve for the optimal transmission expansion. Contrary to the proactive methodology proposed by Sauma and Oren (2006), our model solves the optimal transmission expansion problem anticipating both generation investment and market clearing. We use the marginalist theory with production cost functions inversely related to the installed capacity in a perfectly competitive electricity market and we find all possible generation expansion pure Nash equilibria. We illustrate our results using 3-node and 4-node examples.
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- Berenstein, Severin & Bushnell, James & Stoft, Steven, 2000.
"The Competitive Effects of Transmission Capacity in a Deregulated Electricity Industry,"
Staff General Research Papers Archive
13145, Iowa State University, Department of Economics.
- Severin Borenstein & James. Bushnell & Steven Stoft, 2000. "The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 294-325, Summer.
- Severin Borenstein & James Bushnell & Steven Stoft, 1997. "The Competitive Effects of Transmission Capacity in a Deregulated Electricity Industry," NBER Working Papers 6293, National Bureau of Economic Research, Inc.
- Enzo Sauma & Shmuel Oren, 2006. "Proactive planning and valuation of transmission investments in restructured electricity markets," Journal of Regulatory Economics, Springer, vol. 30(3), pages 358-387, November.
- Enzo Sauma & Shmuel Oren, 2006. "Proactive planning and valuation of transmission investments in restructured electricity markets," Journal of Regulatory Economics, Springer, vol. 30(3), pages 261-290, November.
- David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
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