Developing concurrent investment plans for power generation and transmission

Abstract

Decisions on electric power generation and transmission investments may have crucial effects on the development of industrial and residential areas. Decisions made on the infrastructure should have economically beneficial consequences for producers and consumers. The aim of this paper is to propose a model that considers transmission and generation investments simultaneously. The proposed model fills in the gap between models for developing long-term power generation policies and instantaneous power flow models. Unlike other investment models, it explicitly takes the high voltage transmission network into account and the selection of new generation plants located on the interconnected network is made in a more realistic manner considering transmission bottlenecks.

The problem subsumes the capacitated network location problem and the network design problem, the former being related to decisions on generation expansion and the latter to decisions on transmission network expansion. The integrated model becomes NP in both feasibility and optimality, because of the sub-problems it contains. Here, a practical procedure is proposed to achieve overall feasibility and also to improve investment decisions when the solution is feasible. The model is tested on the dense interconnected network of an industrialized region in Turkey. The implementation shows how future infeasibilities in the transmission network are highlighted by the model and how generation investment decisions are affected by network expansion alternatives.

Introduction

An adequate electric power generation and transmission capacity is essential for a sustained economic growth. As demand for power increases rapidly in developing countries, congestion becomes a key factor in the smooth functioning of the generation system and security of supply.

Power generation and transmission should be planned in an integrated manner since they constitute two inseparable components of electrical power infrastructure. Transmission plans have immediate impacts on generation development schemes. Concurrent planning of generation and transmission is particularly important in developing countries, where substantial loss of natural resources exist due to congested lines and a standard grid system is not yet developed. In some developing countries, there exists a substantial potential of renewable resource based generation at locations that are remote to industrialized regions. The availability of adequate access to the transmission system has a strong impact on the locations, types and sizes of generation facilities that are added to the system.

An important factor to be considered is that many developing countries are also in the process of liberalizing the electricity market. In competitive market conditions, where generation is privatized and electricity prices depend on marginal generation costs, congestion prevents the full exploitation of market opening, because it increases unit electricity prices (consumer costs) and leads to undeserved gains or losses for generating firms affecting their return on investment (producer's loss). Consequently, a reliable transmission planning system that accounts for medium to long-term generation capacity planning is required to prevent any intentional or non-intentional blockage in the transmission system.

Bottlenecks in the transmission system also affect international electricity trade. Expansions and upgrades of domestic transmission networks that are coupled with generation planning may relieve the load on cross-border interconnections and increase bulk international electricity trade. The impacts of domestic generation patterns on trans-national lines are discussed in detail in recent reports concerning transmission systems in Europe and US (EC Directorate General Energy and Transport, 2001; Hirst and Kirby, 2001).

Altogether these issues place the focus on the need to analyze generation and transmission investment plans together such that de-congestion, enhanced market trade and cleaner energy generation can be achieved.

In this paper, a model is developed for obtaining a dynamic long-term investment plan involving strategic decisions on the expansion of electric power infrastructure including generation and high voltage transmission. The model is tested using data pertaining to a highly industrialized region in Turkey and investment scenarios are developed for a planning horizon that covers the years 2000–2010. The proposed model takes into account the restrictions of the region's high voltage interconnected transmission network explicitly. It assumes that transmission investment plans are centralized and generation is not yet fully privatized. This reflects the current situation in Turkey where generation plants are built under “Build, Operate and Transfer” contracts. The model aims to minimize the net present worth of generation and transmission investment costs and generation operating costs while satisfying energy demand.

The output of the model provides the optimal selection of the locations and sizes of new generation facilities on the interconnected network and the transmission network expansions required to satisfy future load. The model also gives a foresight on the return on investment for building new generation plants in different regions because it specifies the optimal future utilization rates of generation capacity in existing and planned facilities. An extension of this model could be to incorporate competitive electricity market policies in investment strategies.

In the following sections, the problem background is discussed briefly and the mathematical formulation of the model is conveyed. Then, a practical procedure used to identify feasible and improved solutions is described, and the investment scenarios developed for Marmara region (Turkey) are illustrated.