Independent Transmission Companies Research Articles

Transmission Network Investment Using Incentive Regulation: A Disjunctive Programming Approach

A well-planned electric transmission infrastructure is the foundation of a reliable and efficient power system, especially in the presence of large scale renewable generation. However, the current electricity market designs lack incentive mechanisms which can guarantee optimal transmission investments and ensure reliable integration of renewable generation such as wind. This paper first proposes a stochastic bilevel disjunctive program for optimal transmission investment based on the newly proposed theoretical H-R-G-V incentive mechanism. The upper level is a profit-maximization problem of an independent transmission company (Transco), while the lower level is a welfare maximization problem. The revenue of the Transco is bounded by a regulatory constraint set by the regulator in order to induce socially optimal investments. The application of the H-R-G-V mechanism allows the regulator to ensure social maximum transmission investments and helps to reduce transmission congestion and wind power spillage. The transmission investment under the H-R-G-V mechanism is modeled as a stochastic bilevel disjunctive program. To solve the developed mathematical model we first propose a series of linearization and reformulation techniques to recast the original model as a stochastic mixed integer linear problem (MILP). We exploit the disjunctive nature of the reformulated stochastic MILP model and further propose a Bean decomposition algorithm to efficiently solve the stochastic MILP model. The proposed decomposition algorithm is also modified and accelerated to improve the computational performance. The computational performance of our MILP modeling approach and modified and accelerated Bean decomposition algorithm is studied through several examples in detail. The simulation results confirm a promising performance of both the modeling approach and its solution algorithm.

Stochastic and minimum regret formulations for transmission network expansion planning under uncertainties

After deregulation of the Power sector, uncertainty has increased considerably. Vertically integrated utilities were unbundled into independent generation, transmission and distribution companies. Transmission network expansion planning (TNEP) is now performed independent from generation planning. In this environment TNEP must include uncertainties of the generation sector as well as its own. Uncertainty in generation costs affecting optimal dispatch and uncertainty in demand loads are captured through composite scenarios. Probabilities are assigned to different scenarios. The effects of these uncertainties are transferred to the objective function in terms of total costs, which include: generation (dispatch), transmission expansion and load curtailment costs. Two formulations are presented: stochastic and minimum regret. The stochastic formulation seeks a design with minimum expected cost. The minimum regret formulation seeks a design with robust performance in terms of variance of the operational costs. Results for a test problem and a potential application to a real system are presented.

An Unfixed Piecewise-Optimal Reactive Power-Flow Model and its Algorithm for AC-DC Systems

A novel AC-DC optimal reactive power flow (ORPF) model with the generator capability limits is proposed. The objective is to minimize the total cost of generator reactive and active power outputs paid by an independent transmission company. In the model, the generator operation area is divided into four parts with each one having a different reactive output cost function. The boundaries between the four parts change with operation states of generators and are unfixed. The model is an unfixed piecewise mixed-integer nonlinear programming problem. A heuristic approach is introduced into the interior point method to solve the unfixed piecewise problem. The numerical results of six test systems that range in size from 14 to 2572 buses demonstrate the effectiveness of the proposed method.

A Quantitative Analysis of the Relationship Between Congestion and Reliability in Electric Power Networks

Restructuring efforts in the U.S. electric power sector have tried to encourage transmission investment by independent (non-utility) transmission companies, and have promoted various levels of market-based transmission investment. Underlying this shift to “merchant” transmission investment is an assumption that new transmission infrastructure can be classified as providing a congestion-relief benefit or a reliability benefit. In this paper, we demonstrate that this assumption is largely incorrect for meshed interconnections such as electric power networks. We focus on a particular network topology known as the Wheatstone network to show how congestion and reliability can represent tradeoffs. Lines that cause congestion may be justified on reliability grounds. We decompose the congestion and reliability effects of a given network alteration, and demonstrate their dependence through simulations on a 118-bus test network. The true relationship between congestion and reliability depends critically on identifying the relevant range of demand for evaluating any network externalities.

The Angle of Repose in Electricity Restructuring: The 2003 Energy Act, FERC, and the Outlook for Transmission Investment

We seem to have ended up with a policy to let a hundred independent transmission companies bloom. The onus is on those with capital to get together with those who have transmission skills to develop proposals to those who no longer want to be in the transmission business.

04/00279 The role of the Independent Transmission Company in standardized wholesale electricity markets: Morey, M. J. and Hirst, E. The Electricity Journal, 2003, 16, (4), 31–45

04/00279 The role of the Independent Transmission Company in standardized wholesale electricity markets: Morey, M. J. and Hirst, E. The Electricity Journal, 2003, 16, (4), 31–45

04/00277 Performance-based regulation for independent transmission companies: delivering the promise of standard market design: Morey, M. J. The Electricity Journal, 2003, 16, (5), 35–51

The Act was the culmination of more than eight years of legislative effort in Congress. During this period, the nation saw the Western electricity crisis of 2000-01, the Sept. 11 attacks, the collapse of Enron, the growth of RTOs, and the August 2003 blackout. Each of these influenced the dynamics of the debate.

How Can FERC Find its Way out of the SMD Cul-de-Sac? Stimulate the Transmission Sector!

For-profit, independent transmission companies will move more efficiently, effectively, and swiftly to restore stability in the industry and accelerate investment in the grid, development of regional markets, and the bringing of competitive market prices to consumers.

Performance-Based Regulation for Independent Transmission Companies: Delivering the Promise of Standard Market Design

A well-designed price cap plan can replace cost-of-service regulation’s weaker incentives for investment in improved efficiency and investment in the grid with positive rewards for superior performance. That brings benefits for market participants, transmission companies, and regulators.

The Role of the Independent Transmission Company in Standardized Wholesale Electricity Markets

ITCs could perform all the functions of an ITP provided an effective performance-based rate, such as a price cap, is in place to provide incentives that ensure the ITC does not unfairly discriminate against other transmission owners, generation, or demand management.

Collusive Long-Run Investments Under Transmission Price-Caps

In the short run, constraints in the electricity transmission system may give market power to generators. This paper examines whether the constraints themselves are a long-run equilibrium outcome in a competitive environment. We show that independent transmission companies and generators can tacitly collude to raise prices to consumers and divide the resulting profits. We also show that price cap regulation does not prevent this behavior and may in fact contribute to it. The mechanism for collusion is that generators locate their plants so that a capacity-constrained transmission line lies between them and their consumer market. We show that this constraint-based collusion can be sustained in a static game without any punishment strategies.

Discussion of "Reactive power as an ancillary service" [and closure

The original authors (K. Bhattacharya and J. Zhong, see ibid., vol. 16, pp. 294-300, 2001) discussed deregulation with independent system operators (ISOs). In this paper, the author argues that independent transmission companies (ITCs) are an alternative and probably a better long term approach. ITCs have advantages in the planning, rapid installation, and operation of network reactive power compensation devices. The original authors' response is also presented.

The Life and Death of Regional Transmission Organizations

Transmission should be allowed to emerge as a healthy, stand-alone business accountable to shareholders, customers, and consumers. A binary model comprised of independent transmission companies and independent market administrators would best fulfill FERC's goals of a national grid for the seamless movement of electric energy.

Price Regulation for Independent Transmission Companies

This paper considers methods of price structure regulation of electricity transmission in the context of an independent transmission company (TRANSCO). The focus is on two-part tariffs where the variable part would reflect congestion charges (and ancillary services) while the fixed part would reflect capacity costs. The two-part tariffs form a price-cap index, and the firm could rebalance prices, as long as the index satisfies the price-cap constraint. The firm would then have incentives to trade off congestion against capacity expansion in such a way that it becomes profitable to expand, whenever the costs of congestion on average exceed the costs of expansion. However, with chained Laspeyres weights in the price-cap index expansion may be suboptimal. We therefore discuss ways to improve the expansion factor. Implementing the regulatory schemes considered suggests a hybrid approach combining a TRANSCO with an independent system operator (ISO).

The Case for Reasonable Incentives to Promote Independent Transmission Companies

Restructuring warrants a close examination of how FERC's ratemaking policies should be applied to ITCs. Otherwise, proper incentives may be lacking, hindering the transition to competitive markets.

Transmission in transition: bringing power to market

The US transmission network, representing only 7% of electric bills, is vital to a competitive electricity market. The author argues that the network needs to be controlled by people and firms that are completely disinterested in generation market outcomes. Transmission also needs to be controlled by its owners, who will regard further investments in the grid to be strategic, i.e., conducive to their business. Transmission is too important to be left to the government, or its ownership and control unnecessarily divided to the detriment of the public interest. He believes that the best structural form for transmission in the United States is a separate, for-profit independent transmission company.

Breaking the mould: National Grid's experience in creating value through independent transmission

As the world's first privately-owned independent transmission company, National Grid (NGC) has almost a decade's experience at the heart of a radically changing electricity market in England and Wales. Since its formation in 1990, NGC has advanced beyond addressing the initial question of how to `keep the lights on' in a disaggregated industry. Within an environment far removed from the centrally-controlled days of the Central Electricity Generating Board, NGC is now creating market solutions for an ever greater range of transmission activities. In particular NGC has developed the complex roles of network manager and system controller. This experience should add significantly to the knowledge being gathered internationally about the liberalisation of energy industries.