Most deregulated electricity markets are based on an open-access transmission system and locational marginal prices for energy. All other elements required for reliability are folded into ancillary services. In such a market design, the transmission system remains regulated, without proper incentives for future expansion including reactive power, except when system reliability is at issue. In this proposal, we offer a fundamentally different view that the transmission system should consist of a regulated part reimbursed at a fixed rate of return and a de-regulated part paid only if it offers benefits to the system operation, such as removing binding system reliability constraints and reducing the overall production cost. Thus, new transmission facilities can be compensated based on locational energy price differences. The motivation for this research was based on a recently developed offer-based approach to dynamic var supplies in the real-time electricity market, encompassing a fixed-payment-based supply to ensure basic system operation and a market-based supply committed only when necessary. In this work, we aim to establish a unified approach to transmission system costs, which will allow current practices as special cases.
Intellectual Merits: Most current research is focused on fine tuning the cost allocation related to various sectors of the deregulated market and on market power analysis. The proposed approach is novel and has a high potential for encouraging new transmission investments for additional transfer of less expensive energy and reduced probability of load curtailment. It will also generate new investigative directions for university researchers, power market designers, and energy management vendors.
Broader Impacts: The proposed approach will lead to more transmission system investments and improve the efficiency of power markets and power consumption. The PI plans to include the research results in the "Power System Operation" course taught at Rensselaer. The PI will continue to involve minority and under-represented groups of students in the research.
