Transmission Investment in Competitive Electricity Markets

The transition from a central operator to a decentralized decision making model has been successful, mainly because players could keep their freedom to select their best policy without substantially altering the entire system. However, there is no market counterpart to deal with the issue of planning and investment so far. The reason is that planning has traditionally been seen as a centralized task. An investment decision affects the entire network. Thus, the challenge is to create a new model for investment and investigate its policy implications. This paper proposes the construction of an analytical framework for the expansion of the transmission network in competitive markets. To illustrate our framework, several case studies are presented and relevant conclusions are derived.