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Transmission expansion in an oligopoly considering generation investment equilibrium

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  • Taheri, S. Saeid
  • Kazempour, Jalal
  • Seyedshenava, Seyedjalal

Abstract

Transmission expansion planning (TEP) is a sophisticated decision-making problem, especially in an oligopolistic electricity market in which a number of strategic (price-maker) producers compete together. A transmission system planner, who is in charge of making TEP decisions, requires considering the future generation investment actions. However, in such an oligopolistic market, each producer makes its own strategic generation investment decisions. This motivates the transmission system planner to consider the generation investment decision-making problem of all producers within its TEP model. The strategic generation investment problem of each producer can be represented by a complementarity bi-level model. The joint consideration of all bi-level models, one per producer, characterizes the generation investment equilibrium that identifies the future evolution of generation investment in the market. This paper proposes a tri-level TEP decision-making model to be solved by the transmission system planner, whose objective is to maximize the social welfare of the market minus the expansion costs, and whose constraints are the transmission expansion limits as well as the generation investment equilibrium problem. This model is then recast as a mixed-integer linear programming problem and solved. Numerical results from an illustrative example and a case study based on the IEEE 14-bus test system demonstrate the usefulness of the proposed approach.

Suggested Citation

  • Taheri, S. Saeid & Kazempour, Jalal & Seyedshenava, Seyedjalal, 2017. "Transmission expansion in an oligopoly considering generation investment equilibrium," Energy Economics, Elsevier, vol. 64(C), pages 55-62.
    • Handle: RePEc:eee:eneeco:v:64:y:2017:i:c:p:55-62
    DOI: 10.1016/j.eneco.2017.03.003
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    References listed on IDEAS

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    Cited by:

    1. Churkin, Andrey & Bialek, Janusz & Pozo, David & Sauma, Enzo & Korgin, Nikolay, 2021. "Review of Cooperative Game Theory applications in power system expansion planning," Renewable and Sustainable Energy Reviews, Elsevier, vol. 145(C).
    2. Caunhye, Aakil M. & Cardin, Michel-Alexandre, 2018. "Towards more resilient integrated power grid capacity expansion: A robust optimization approach with operational flexibility," Energy Economics, Elsevier, vol. 72(C), pages 20-34.
    3. Li, Carmen & Chyong, Chi Kong & Reiner, David M. & Roques, Fabien, 2024. "Taking a Portfolio approach to wind and solar deployment: The case of the National Electricity Market in Australia," Applied Energy, Elsevier, vol. 369(C).
    4. Jinghong Zhou & Ke Chen & Weidong Wang, 2023. "A Power Evolution Game Model and Its Application Contained in Virtual Power Plants," Energies, MDPI, vol. 16(11), pages 1-22, May.
    5. Jaber Valinejad & Mousa Marzband & Michael Elsdon & Ameena Saad Al-Sumaiti & Taghi Barforoushi, 2019. "Dynamic Carbon-Constrained EPEC Model for Strategic Generation Investment Incentives with the Aim of Reducing CO 2 Emissions," Energies, MDPI, vol. 12(24), pages 1-35, December.
    6. Aryani, Morteza & Ahmadian, Mohammad & Sheikh-El-Eslami, Mohammad-Kazem, 2021. "Coordination of risk-based generation investments in conventional and renewable capacities in oligopolistic electricity markets: A robust regulatory tool," Energy, Elsevier, vol. 214(C).
    7. Gonzalez-Romero, Isaac-Camilo & Wogrin, Sonja & Gomez, Tomas, 2021. "Transmission and storage expansion planning under imperfect market competition: Social planner versus merchant investor," Energy Economics, Elsevier, vol. 103(C).

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    More about this item

    Keywords

    Transmission expansion planning (TEP); Generation investment equilibrium; Strategic producers; Mathematical program with equilibrium constraints (MPEC); Equilibrium problem with equilibrium constraints (EPEC); Oligopoly;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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