Economic Analysis of Electric Power Transmission Expansion

When transmission congestion reaches a high level, short-term congestion management tools become more expensive than capital cost investments such as generation or transmission expansion. In such cases, an economics-based investment plan should be developed for the power system. Although there is no well-accepted procedure to accomplish this, numerous models and approaches have been proposed in the power literature. In this article, we develop a decision framework that can be used to model transmission expansion planning and to make economic comparison of different transmission investment plans feasible. We define and compare three approaches under this framework: 1) A mathematical programming model with an overall economic welfare objective, 2) a market-based approach under a budget constraint, and 3) an uncongested system obtained using a market-based approach. In addition, we present several measures that can be used to compare these transmission investment plans.

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