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The Impact of Neighboring Markets on Renewable Locations, Transmission Expansion, and Generation Investment

  • Many long-term investment planning models for liberalized electricity markets either optimize for the entire electricity system or focus on confined jurisdictions, abstracting from adjacent markets. In this paper, we provide models for analyzing the impact of the interdependencies between a core electricity market and its neighboring markets on key long-run decisions. This we do both for zonal and nodal pricing schemes. The identification of welfare optimal investments in transmission lines and renewable capacity within a core electricity market requires a spatially restricted objective function, which also accounts for benefits from cross-border electricity trading. This leads to mixed-integer nonlinear multilevel optimization problems with bilinear nonconvexities for which we adapt a Benders-like decomposition approach from the literature. In a case study, we use a stylized six-node network to disentangle different effects of optimal regional (as compared to supra-regional) investment planning. Regional planning alters investment in transmission and renewable capacity in the core region, which affects private investment in generation capacity also in adjacent regions and increases welfare in the core region at the cost of system welfare. Depending on the congestion-pricing scheme, the regulator of the core region follows different strategies to increase welfare causing distributional effects among stakeholders.

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Metadaten
Author:Jonas Egerer, Veronika Grimm, Thomas Kleinert, Martin Schmidt, Gregor Zöttl
Parent Title (German):European Journal of Operational Research
Document Type:Article
Language:English
Date of Publication (online):2019/12/03
Date of first Publication:2019/12/03
Release Date:2019/12/03
Tag:Benders Decomposition; Multilevel Optimization; Neighboring Markets; Network Expansion; Renewables
Page Number:35
Institutes:Friedrich-Alexander-Universität Erlangen-Nürnberg
Universität Trier
Subprojects:A05
B08
B09
Licence (German):License LogoCreative Commons - CC BY - Namensnennung 4.0 International