A cost-benefit analysis of transmission network reinforcement driven by generation capacity expansion

This paper assesses the effects of the future European power generation system with strict CO₂ emission reduction targets on the planning of cross-border interconnection lines. Results from a techno-economic energy systems model have been used as input to this work, regarding the development of the European power generation system until the year 2050, meeting the EU 2020 CO₂ target and a 85% emissions reduction until the year 2050. A simplified UCTE power system model was developed in order to analyze how the cross-border interconnections in continental Europe are affected by the generation plans using an iterative method. The paper also attempts to identify the congestion points and proposes solutions based on nodal price modeling. A cost-benefit analysis (CBA) is used to evaluate the appropriate transmission planning strategy, with the costs being the long-term investment costs and the benefits being both the avoided environmental costs and the total congestion costs. The effects of new investments on the nodal prices are also studied. The results show that the profitability of the investments is influenced by the available production mix and the forecasted CO₂ prices. The avoided congestion costs participate rather insignificantly in the CBA, which means that congestions are not relieved, showing that many interconnections are insufficient for nodal pricing market structure.