The value of cooperation in interregional transmission planning: A noncooperative equilibrium model approach

Abstract Optimization methods for regional transmission planning overlook boundaries between transmission planning entities and do not account for their lack of coordination. The practical result of those boundaries is inefficient plans because one planning region may disregard the costs and benefits that its network changes impose on other regions. We develop a bi-level EPEC (Equilibrium Problem with Equilibrium Constraints) model that represents a game among multiple noncooperative transmission planners in the upper level together with consumers and generators for the entire region in the lower level. We find that the equilibrium transmission plans from such a framework can differ significantly from those from a cooperative framework and have fewer net benefits. Importantly, we find that cooperation among transmission planners leads to increased competition among generators from adjoining regions, which in turn leads to more efficient generator investments. We prove that the system-wide benefit from cooperation among transmission planners is always positive. We then calculate the value of this cooperation for a small test case with two transmission planners, while also identifying the market parties who gain — and those who lose — from this cooperation.