Coordination of electricity transmission and generation investments

For over twenty years, electricity market liberalization has advanced short-term market efficiency in wholesale markets, but little progress has been made on coordinated transmission and generation investments. With fast penetration of renewables, widespread of distributed energy resources and emergence of smart-grid and energy storage technologies, the stake is growing significantly higher for the long-term efficiency of liberalized wholesale markets with an aging transmission infrastructure. This paper presents a methodology based on a general framework of two-stage stochastic optimization model for analyzing interactions between transmission and generation investments. The methodology features economic effects of prices, incentives and welfare impacts under alternative coordination approaches and cost recovery mechanisms. Application to scenarios under efficient coordination, merchant transmission, and sequential coordination are illustrated using a simple radial transmission network. Interestingly, a Boiteux-Ramsey cost sharing rule produces energy prices and social welfare impacts that appear essentially indistinguishable from those obtained under efficient coordination. (c) 2019 Elsevier B.V. All rights reserved.