Research on the impact of financial transmission rights on transmission expansion: A system dynamics model

Abstract

With the development of the power market, the traditional transmission congestion management method of using a power generation plan is no longer applicable, and congestion management using financial transmission rights (FTRs) is becoming a trend. However, after the introduction of FTRs, the profit from transmission lines changes, and those changes affect the expansion of and investment in transmission lines. Therefore, this paper constructs a system dynamics analysis model and presents specific calculation methods and a case analysis. Load growth, construction time, congestion, the step nature of the bid from generating units, and relative changes in the locational marginal prices (LMPs) at the sink and source nodes under the expansion and non-expansion scenarios are considered for a simulation calculation of net present value of transmission expansion project. Sensitivity analyses of factors such as generator bid prices, transmission expansion costs, the proportion of expansion capacity to transmission congestion, and the market maturity of FTRs are analysed. The results show that decision-making on the basis of transmission expansion investment in combination with FTRs is feasible and such decision-making can reflect the value of transmission expansion via the market, which conforms to market rules. That decision-making method is very important for the marketisation of power transmission.