Economic Impact Assessment of Transmission Enhancement Projects

In this project, we propose a new methodological framework for assessing the economic impact of transmission investment. This framework improves on the current state of art by explicitly modeling strategic responses of generators to transmission investments. Using an economic measure of social benefit, results show that transmission planning should lead rather than follow generation investments. As a result, transmission investments should be treated as infrastructure development in the same general way that roadway investments are used for regional development. An example of such a policy is the Competitive Renewable Energy Zones in Texas for providing transmission that attracts wind generation investment to specific geographic areas. The project developed a game theoretic framework employing a three-stage game for assessing economic value of transmission projects. A paper resulting from this project won the Best Paper in Energy 2008 Award from the Institute for Operations Research and the Management Sciences. Illustrations in the report help explain the motivation for model development and explain the results.