An Effective Transmission Network Expansion Cost Allocation Based on Game Theory

The expansion of transmission systems impacts many entities in the market environment. Each entity may fare better or worse as a result of congestion relief in the presence of new investments. Negatively affected firms exert their influence to prevent the expansion from taking place. The opposition of these firms and the lack of appropriate incentives results in insufficient investments in transmission assets. The network is being frequently used at its maximum limits, leading to economic inefficiencies and reduced reliability. Hence, there is a need for effective incentive schemes for network expansion. In this paper, we propose a game theory-based scheme for the allocation of transmission expansion costs among market entities. The allocation takes into account both the physical and economic impacts of the new transmission assets and the influence of each firm on the expansion decision. This is the first scheme designed to give all market participants explicit incentives to support the expansion. The application of the allocation solution to the Garver six-bus system is presented to illustrate the capabilities of the proposed method