Optimal timing of transmission investments in electricity markets

Reliability is a growing problem in the deregulated electricity markets. This paper aims to study the incentives available to merchant investors; specifically, in the form of congestion rents. Given certain time windows, will the revenues be profitable over the transmission line cost? If so, we find the optimal time that maximizes this profit. We approach this problem by restricting the number of stochastic congestion events. Then, we extend it to include an infinite number of congestions. Using simulation, we explore the behavior of the optimal investment time with respect to the stationary demand model parameters; then extend the model to consider the variability of demand.