Transmission Planning in Liberalised Electricity Markets

Transmission planning is complex involving consideration of the impact of a transmission augmentation under a large number of future demand and supply scenarios. In principle if the liberalised electricity market is sufficiently competitive the same tools and techniques that have been developed for transmission planning in the context of an integrated electricity industry can be applied. However two new issues arise: (a) The first is coordination between generation and transmission investment. (b) The second issue is the problem of generator market power. Many commentators point out that electricity markets are prone to the exercise of market power. The additional benefits of reducing market power have been referred to as the competition benefit. Although it is widely acknowledged that transmission investment may affect generator market power there is as yet no widely accepted methodology for computing the competition benefits of a transmission augmentation and in practice competition benefits are only estimated on an ad hoc basis if at all. This book sets out a methodology for modelling market power in the context of transmission planning.