Analysis of market driven transmission expansion and investment options

Basic economic aspects of network expansion considering the recently emerging issues and concepts in the operation of transmission networks in competitive power markets are discussed. General formulation of long-term resource planning for optimal network expansion is outlined. The optimal solutions from the perspectives of optimizing the social benefit as well as maximizing the profits of individual participants have been analyzed. The measures of "congestion cost" and "congestion revenue" can be utilized to identify the optimal line capacities from the perspectives of various market participants. Thorough analysis of a simple 2-bus system using simple bid functions has been presented to clearly highlight the nature of optimal transmission capacity from different perspectives. Analyses of 3-bus system and 6-bus system have been presented to investigate the trends of these optimal capacities in larger systems.