A Method to Evaluate Economic Benefits in Interconnected Systems

Energy interchange and displacement of costly and/or scarce resources in interconnected system operation is a great concern. The measure of the degree of economic benefits due to such interconnected operation has been referred to as "tight pooling" or "loose pooling". This paper proposes a new method of evaluating the expected savings in the energy production costs due to energy interchanges as a function of tie line capacity. Random failures of generating units and their effect on the incremental cost of energy production are explicitly taken into consideration. Such a mathematical model would aid system planners in the economic decision making process of planning for a certain transfer capacity or to give an economic credit to the existing tie lines. The method has been applied to two interconnected systems in which the economic benefits due to energy interchange are evaluated.