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A Nash Approach to Planning Merchant Transmission for Renewable Resource Integration

Author

Listed:
  • Zhou, Qun
  • Tesfatsion, Leigh
  • Liu, Chen-Ching
  • Chu, Ron F.
  • Sun, Wei

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.

Suggested Citation

  • Zhou, Qun & Tesfatsion, Leigh & Liu, Chen-Ching & Chu, Ron F. & Sun, Wei, 2013. "A Nash Approach to Planning Merchant Transmission for Renewable Resource Integration," Staff General Research Papers Archive 36496, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:36496
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    Cited by:

    1. Aviad Navon & Gefen Ben Yosef & Ram Machlev & Shmuel Shapira & Nilanjan Roy Chowdhury & Juri Belikov & Ariel Orda & Yoash Levron, 2020. "Applications of Game Theory to Design and Operation of Modern Power Systems: A Comprehensive Review," Energies, MDPI, vol. 13(15), pages 1-35, August.
    2. Yang, Nan & Xiong, Zhendong & Ding, Li & Liu, Yikui & Wu, Lei & Liu, Zhao & Shen, Xun & Zhu, Binxin & Li, Zhenhua & Huang, Yuehua, 2024. "A game-based power system planning approach considering real options and coordination of all types of participants," Energy, Elsevier, vol. 312(C).
    3. Guo, Hui & Xiao, Yunpeng & Pinson, Pierre & Wang, Xiuli & Zhang, Likai & Wang, Xifan, 2025. "A negotiation-based incentive mechanism for efficient Transmission Expansion Planning considering generation investment equilibrium in deregulated environment," Applied Energy, Elsevier, vol. 386(C).

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    Keywords

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    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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