Transmission Network Investment in Liberalized Power Markets

Contents
An Introduction to Transmission Network Investment in the New Market Regime
Basic Economics and Engineering of Transmission Network Investment
Definition and Theory of Transmission Network Planning
1 Introduction
1.1 Factors Affecting Transmission Expansion Planning
1.2 Transmission Investment Financing and Coordination
2 Literature Survey
2.1 Solution Methods
2.2 Power System Adequacy and Reliability
2.3 Uncertainties
3 Transmission Expansion Planning Formulation and Decomposition Techniques
3.1 Two-Stage Stochastic TEP Formulation
3.2 Robust Optimization TEP Formulation
3.3 Constraint Filtering and Optimization Problem Size Reduction
3.4 Decomposition Techniques
4 A Generalized Framework for Stochastic TEP Studies
4.1 Framework Overview
4.2 Scenario Bundling
4.3 Model Performance Discussion
5 Case Study and Numerical Results
5.1 13-Bus Test System
5.2 Reduced ERCOT System
5.3 Full ERCOT System—High Load Growth Area Project
References
Regulated Expansion of the Power Transmission Grid
1 Introduction
2 The Story in Words
2.1 A New Set of Problems
2.2 Locational Marginal Prices
2.3 Regulated Transmission Expansion
2.4 Fixed Cost Recovery
2.5 Governance Issues
3 Short-Term Congestion Management
3.1 Setup
3.2 Interconnection Unconstrained
3.3 Locational Marginal Pricing
3.4 Countertrading
4 Transmission Grid Expansion Under Different Regimes
4.1 Optimal Transmission Capacity
4.2 The Congestion Rent Does Not Induce Optimal Grid Expansion
4.3 Optimal Regulation of a Monopoly Transmission Company
5 Extension to a General Network
5.1 Setup
5.2 Characterization of the Optimal Dispatch
5.3 Merchandizing Surplus
5.4 Optimal Transmission Capacity
5.5 Optimal Regulatory Contract
6 Concluding Observations
References
Transmission Planning and Operation in the Wholesale Market Regime
1 Introduction
2 Grid Reliability in the Vertically-Integrated Monopoly Versus Wholesale Market Regime
3 Optimal Configuration of Transmission Network in the Vertically-Integrated Monopoly Versus Wholesale Market Regime
3.1 Second-Best Solutions for Monopoly and Wholesale Market Regimes
3.2 Why Wholesale Market Regime Is Likely to Require More Transmission Capacity?
4 Consequences of Continuing to Rely on Methodologies from the Vertically-Integrated Monopoly Regime
5 A Methodology for Evaluating Transmission Expansions in the Wholesale Market Regime
5.1 Modeling Challenges in the Wholesale Market Regime
5.2 A General Forward-Looking Methodology
5.3 Implementing a Forward-Looking Transmission Planning Process
5.4 Modeling Policy-Driven Future Entry Decisions
6 Increased Sophistication of Transmission Planning Process
6.1 The Downside of Open Access
6.2 The Form of Congestion Management Matters for Benefits Measurement
6.3 Expanded Geographic and Industry Scope
6.4 The Viability of Market-Based Transmission Expansions
7 The Insurance Value of Transmission Expansions
8 Conclusion
References
Cost Allocation Issues in Transmission Network Investment
1 Why Does Transmission Network Cost Allocation Matter?
1.1 Relationship with Other Aspects of Transmission Regulation
1.2 Cost Allocation for Regulated Investments: Completing the Recovery of the Allowed Regulated Revenue
1.3 Cost Allocation for Investments Promoted by Private Parties
2 Guidelines to Complete the Recovery of the Allowed Regulated Revenue
2.1 Fundamentals of Transmission Network Charges Design: Main Principles. Discussing the Relationship Between Cost-Causality and Benefit-Driven Cost Allocation
2.2 Some Practical Implementation Issues in the Design of Transmission Charges
3 Benefit-Driven Network Cost Allocation: The “Beneficiary-Pays” Approach
3.1 Benefit-Driven Cost Allocation and the “Cost-Causality” Principle
3.2 Main Open Issues and Implementation Difficulties
4 Other Approaches to Transmission Network Cost Allocation
4.1 Network Cost Allocation Methods Based on Usage
4.2 Tariffs Without a Locational Component
5 Transmission Network Cost Allocation in Regional Power Systems
5.1 The Need for Coordination and Orthodoxy in Inter-system and Intra-system Transmission Pricing
5.2 Case Examples of Cost Allocation Approaches in Regional Markets
6 Conclusions
References
Transmission Planning, Investment, and Cost Allocation in US ISO Markets
1 Introduction and Background
2 ‘Reliable and Economically Efficient’
2.1 Co-Optimization
2.2 Price-Responsive Demand
2.3 Market Power
2.4 Siting and Eminent Domain
3 Uncertainty
3.1 Natural Gas Price Uncertainty
3.2 Weather Uncertainty
3.3 Technology Innovation Uncertainty
3.4 Risk Management
3.5 Summary
4 Models
4.1 Literature Review of Models
4.2 Hydro-Dominated Systems Models
4.3 Production Cost Models
4.4 Reliability Models
4.5 Model Size and Approximations
5 Transmission Competition Models
5.1 The Merchant Transmission Model
5.2 The Competitive Solicitation Model
5.3 The Sponsorship Model
5.4 Cost Caps
6 Cost and Transmission Rights Allocation
6.1 Beneficiaries Pay
6.2 Theory of Cost Allocation
6.3 Two-Node Example of Cost Allocation
6.4 Transmission Rights and Allocation
6.5 Numerical Examples of Beneficiaries Pay
6.6 Efficient Incentives
7 Transmission Expansion Process
7.1 Scenarios
7.2 Strawman Transmission Expansion and Interconnection Process for ISOs
8 Summary, Conclusions, and Recommendations for Further Study
8.1 Summary
8.2 Recommendations for Study of Modeling Process, Cost and Transmission Rights Allocation
References
Transmission Planning and Co-optimization with Market-Based Generation and Storage Investment
1 Introduction
2 Background
2.1 Interactions Among Transmission, Generation, and Storage
2.2 Using Co-optimization to Support Transmission Expansion Planning
2.3 Quantify the Economic Value of Considering Storage Expansion in Transmission Expansion Planning
3 Detailed Formulation
4 Example
4.1 Test Case Description: 54-Node System for WECC
4.2 Questions to Be Answered and the Experimental Design
4.3 The Impact of Storage on Transmission Expansion Plans
4.4 Value of Considering Storage in Co-optimized Transmission Expansion Planning
4.5 Sources of VoMES in Transmission Planning
5 Conclusion
References
A Parametric Programming Approach to Bilevel Merchant Electricity Transmission Investment Problems
1 Introduction
2 Literature Review
3 The Bilevel Transmission Expansion Problem
4 The Parametric Programming Method
4.1 Continuous Upper Level
4.2 Binary Upper Level
4.3 Non-linear Programming
5 Numerical Results
5.1 Data
5.2 Implementation
5.3 Optimal Investments
5.4 Comparison of Solution Methods
6 Conclusion
References
Merchant Investment in Transmission Network
Market Versus Planning Approaches to Transmission and Distribution Investment
1 Introduction
2 The Dominant Engineering and Economic Framework for Transmission and Distribution
3 The Market’s Nose Under the Planning Tent
3.1 Competitive Supply of Power Purchase Agreements for Generation
3.2 Generation Development and Transmission and Distribution Interconnections
3.3 Markets for Transmission Investment
3.4 Markets for Distribution Investment
4 What Policymakers Are Really Trying to Achieve: Regulatory Competition and Strategic Behavior in the Context of Transmission and Distribution Investment
5 Conclusions and Questions for Further Research
References
Competition for Electric Transmission Projects in the USA: FERC Order 1000
1 Introduction and Background
2 Transmission Planning, Project Selection, and Economic Regulation in the USA
3 FERC Order 1000
4 Why Competitive Procurement?
5 Competitive Procurement for Transmission Projects Before Order 1000
5.1 Other Countries
5.2 The USA
6 Early Experience with Order 1000 Competitive Procurement Programs: Overview
7 Experience in Each ISO
7.1 CAISO
7.2 MISO
7.3 SPP
7.4 NYISO
7.5 PJM
7.6 ISO-NE
8 Discussion
9 Conclusions
Data Appendix
References
Merchant Transmission Investment Using Generalized Financial Transmission Rights
1 Introduction
2 Introduction to Hedging and Generalized FTRs
2.1 Supply and Demand Curves
2.2 The Design of Typical Hedge Contracts
2.3 The Design of Inter-nodal Hedging Instruments
3 Hedging Using Generalized FTRs
3.1 The Theoretical Minimum Level of Risk
3.2 Are Fixed-Volume FTRs an Effective Inter-nodal Hedging Instrument?
3.3 Hedging Inter-nodal Pricing Risk Using Generalized FTRs
3.4 Merchant Transmission Investment Using Generalised FTRs
4 Simple Network Examples
4.1 Two-Node Network Example
4.2 Three-Node Network Example
5 Discussion
6 Conclusion
7 Appendix
References
A Simple Merchant-Regulatory Incentive Mechanism Applied to Electricity Transmission Pricing and Investment: The Case of H-R-G-V
1 Introduction
1.1 Incentive Regulation for Transcos
1.2 Merchant Investment and the H-R-G-V Incentive Mechanism
2 How Does H-R-G-V Work?
3 Literature Review: H-R-G-V in Contrast to Other Approaches
4 Dealing with Market Power of Electricity Generators
4.1 The Classic Case Against Merchant Transmission by Joskow and Tirole
4.2 Increasing Competition via Transmission Investment
4.3 Proactive Transmission Planning
4.4 H-R-G-V Regulation of Generators
5 Environmental Problems and Opportunities for Transmission Investment
5.1 Environmental Problems from Siting Transmission Lines
5.2 Environmental Effects of Electricity Generation Affected by the Transmission System
6 The Rent Extraction Issue
7 The Fairness Issue Among Transmission Users
7.1 Fairness Between Electricity Generators and Loads
7.2 Fairness Among Loads
8 Conclusions
Bibliography
Game-Theoretic Modeling of Merchant Transmission Investments
1 Introduction
1.1 Motivation
1.2 Relevant Work
1.3 Chapter Contributions
1.4 Chapter Outline
2 Centralized Transmission Planning Model
3 Modeling Merchant Transmission Planning: Equilibrium Programming
3.1 Setting and Assumptions
3.2 Bi-Level Optimization Model of Merchant Investor
3.3 Determining Nash Equilibrium
3.4 Case Studies on 2-Node System: Analyzing Which Entities Undertake Network Investments
3.5 Case Studies on 2-Node System: Comparing Centralized and Merchant Planning Solutions
4 Modeling Merchant Transmission Planning: Continuum Approximation
4.1 Setting and Assumptions
4.2 Determining Nash Equilibrium
4.3 Theoretical Comparison of Centralized and Merchant Planning Solutions
4.4 Case Studies on 2-Node System
4.5 Case Studies on 3-Node System
4.6 Case Studies on IEEE 24-Node System
5 Conclusions and Future Work
References
Transmission Investment Coordination and Smart Grid
Transmission Investment and Renewable Integration
1 Introduction: Conditions of Integration of Renewables in Modern Power Markets
2 The Backbone for Low-Carbon Power Systems: Developing Transmission Grids for High Levels of Renewable Generation
2.1 Scenario Generation for Transmission Planning
2.2 Assessing Expansion Projects and Elaborating the Transmission Plan
2.3 Cost Allocation, Plan Approval and Project Development
3 Reaching Out: Transmission for Harnessing Renewable Generation Hubs
3.1 Voluntary Coordination of Two Similar Generators
3.2 Centralized Coordination of Two Similar Generators
3.3 Open Access and Governance of the Transmission System
4 Conclusions
References
The Impact of Transmission Development on a 100% Renewable Electricity Supply—A Spatial Case Study on the German Power System
1 Introduction
2 Literature Review
3 Model, Data, and Scenarios
3.1 Dispatch and Investment Model with Linearized Power Flow
3.2 Data
3.3 Scenarios
4 Results and Discussion
4.1 Distributed Electricity Mix
4.2 Storage Capacities
4.3 Transmission Congestion
4.4 Cost Considerations
5 Conclusions
References
Coordination of Gas and Electricity Transmission Investment Decisions
1 Introduction
2 Investment Models in U.S. Electric and Gas Transmission
2.1 Regional Electric Transmission Planning
2.2 The Decentralized Pipeline Expansion Model
3 National and Regional Transmission Investment Experience
3.1 National Experience in Transmission Investment
3.2 The New England Regional Experience
3.3 Incomplete Intermediate Contract Markets and Investment
4 Conclusions and Policy Implications
References
The Emergence of Smart and Flexible Distribution Systems
1 Introduction
2 Smart Grid Techniques
2.1 Description
2.2 Smart Techniques in Practice
2.3 Overall Assessment of Smart Grid Techniques
3 Flexibility Services
3.1 DSO Market Models
4 Summary
References
Practical Experiences with Transmission Investment
Practical Experiences with Transmission Investment in the New Zealand Electricity Market
1 Introduction
2 The Market in 2018
2.1 General Structure
2.2 Governance
2.3 Transmission
2.4 Generation and Retail
2.5 Spot and Hedge Markets
3 Evolution
3.1 Central Planning
3.2 Towards Markets
3.3 Transmission Ownership
3.4 Governance Established
4 Transmission and Competition
4.1 One Market
4.2 Transitory Events and the Code
4.3 Transmission and Wholesale Market Performance
5 Transmission Investment and Regulation
5.1 Light-Handed Regulation
5.2 Transpower Investment and Light-Handed Regulation
5.3 Firm-Specific Regulation and the Grid Investment Test
6 Transmission Pricing
6.1 Introduction
6.2 Grid Charges
6.3 Evaluation of Transmission Pricing
6.4 Beneficiary Pays
6.5 The TPM Proposal
7 Transmission in 2018 and Beyond
Transmission Network Investment Across National Borders: The Liberalized Nordic Electricity Market
1 Introduction
2 The Liberalized Nordic Electricity Market
2.1 History of Liberalization
2.2 The Nordic Power Exchange: Nord Pool
2.3 Generation Capacity in the Liberalized Nordic Electricity Market
2.4 Transmission Capacity in the Liberalized Nordic Electricity Market
3 Economics of Market Integration
3.1 Gains from Electricity Trade
3.2 Security of Supply
3.3 Market Power
3.4 Investment in Generation Capacity
3.5 Environmental Effects
3.6 Network Losses
4 Transmission Network Planning in the Nordic Market
5 Incentives to Undertake Cross-Border Transmission Projects
5.1 Sources of Investment Distortions
5.2 The Value of Cooperation
5.3 The Value of Centralization
5.4 Country Versus TSO Incentives
5.5 Merchant Transmission Investment
5.6 Network Investment When Transfers Are Restricted
6 Discussion
References