Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110321
Authors: 
Hesamzadeh, Mohammad Reza
Rosellon, Juan
Gabriel, Steven A.
Year of Publication: 
2015
Series/Report no.: 
DIW Discussion Papers 1470
Abstract: 
This paper proposes an incentive mechanism for transmission expansion planning. The mechanism is a bilevel program. The upper level is a profit-maximizing transmission company (Transco) which expands its transmission system while endogenously predicts and influences the generation investment. The lower level is the optimal generation dispatch and investment. The Transco funds its transmission investment costs by collecting merchandising surplus and charging a fixed fee to consumers. The Transco is subject to a revenue cap set by the regulator. This mechanism is formulated as a mixed-integer, quadratically-constrained program (MIQCP) and applied to modified Garver and IEEE 24-node systems. The results of proposed approach have been compared with the welfare-maximum benchmark and cases of Transco with cost-plus regulation and no regulation. In all tested cases, the proposed approach results in welfare-maximum outcomes while the other regulatory approaches fail to produce welfare-maximum outcomes. The profit-maximizing approach has also been successful in cases where transmission investment is driven by demand growth and reactive Transco.
Subjects: 
revenue-cap regulation
transmission planning
electricity
JEL: 
D24
L51
L94
Document Type: 
Working Paper

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