Participation of generating companies in transmission investment in electricity markets

Transmission service providers (TSPs) have been facing unprecedented challenges in transmission expansion planning. The budget constraints place strict restrictions on transmission expansion projects, thus causing considerable delays in many transmission expansion projects. The inherent uncertainties and non-linear nature associated with the problem add further complications. To address these issues, a new structure is presented in which the generation companies (GenCos) are involved as investors in transmission expansion projects in the form of joint venture agreements. A cost-benefit analysis is carried out to seek the most profitable sub-plan for a GenCo from a number of expansion plans provided by the TSP. The profit function of the GenCo consists of both incremental expected profit earned from energy production and transmission investment return. The uncertainties associated with construction time of generation and transmission expansion projects are included in the proposed cost-benefit analysis. The method is applied to the IEEE 24-bus reliability test system.