Marginal value of FACTS devices in transmission-constrained electricity markets

With the smart grid technology, the topology of the transmission network can be co-optimized simultaneously with the generation. One technology that allows adjustment of network topology is Flexible AC Transmission System (FACTS). Recently some studies suggest inclusion of FACTS devices in the wholesale electricity markets. Here we assess their values based on the value of the additional transfer capacity they offer to the market. This value is equal to the improvement they make to the social welfare. On the margin, we call it the marginal value of FACTS capacity. We calculate this marginal value analytically on a simple two-node system. A sensitivity-based formulation is provided for calculation of the marginal value in larger and more realistic networks. Simulation studies on a 2-node and a 30-bus system are presented to show how the formulation works.