Universidad Pontificia Comillas. Madrid (Spain)
October 28th, 2022
Summary:
Using old tools to solve modern problems can be costly, especially when discussing the generation and transmission expansion planning problem (GEPTEP). This problem used to be solved with sufficient accuracy under the paradigm of a centralised vertically integrated utility. Consequently, most E.U. energy system models assume perfect competition or perfect foresight, which do not adequately reflect the current paradigm and, thus, may lead to flawed market regulations. We, therefore, ask ourselves, what happens if we keep using cost-minimization tools in modern decentralised markets with new technologies, new market participants (merchant transmission investor, merchant renewable generators) and with an increasing potential to exercise market power?
In this thesis, we present a comprehensive literature review on GEPTEP models, both for co-optimization models (vertically integrated utilities in a centralised environment) and co-planning models (under a market environment with competing generators and imperfect competition). We propose a comprehensive proactive bi-level model (with the transmission company as the leader and generators as followers) that considers sequential investment decisions, imperfect competition, and elastic demand, and by comparing it with the equivalent model of a centralised planning utility.
We propose a methodology that would ultimately allow us to answer our main question. How costly is it to use old tools to solve new problems? Some of the main conclusions are the following: i) If transmission planners ignore imperfect competition, they will probably regret it, by assuming a non-negligible welfare loss. In particular, this welfare loss could be worse when batteries are introduced into the mix, as their flexibility can increase their capacity to exercise market power. ii) Ignoring imperfect competition can be as bad as having a merchant investor, and both might lead to a distortion of the optimal generation mix.
Spanish layman's summary:
Usar herramientas antiguas para resolver nuevos problemas puede ser costoso, más aún cuando se trata del problema de planificación de la generación y el transporte. Aquí nos preguntamos, ¿Qué sucede si seguimos usando modelos de minimización de costes en los actuales mercados descentralizados?
English layman's summary:
Using old tools to solve modern problems can be costly, especially when examining the generation and transmission expansion planning problem. In this thesis, we ask ourselves, what happens if we keep using cost-minimization tools in modern imperfectly competitive decentralized markets?
Descriptors: Power transmission, Power generation, Market structure, Economic equilibrium
Citation:
I.C. González-Romero (2022), Transmission Expansion Planning under imperfect competition. Universidad Pontificia Comillas. Madrid (Spain).
