Impacts of grid reinforcements on the strategic behavior of power market participants

摘要

Various trends in power systems increase the need for network investments on the transmission level. In this paper we compare different investment criteria and transmission technologies to determine where and how the network should be reinforced. We deploy an agent-based model taking explicitly into account that generation companies might behave strategically by submitting bids to the marketplace deviating from their true marginal cost. In a subsequent step we formulate the optimization problem of the Independent System Operator relying on the well-known Locational Marginal Pricing market design. In a last step the ISO can decide for transmission investments, by reinforcing existing lines or installing Flexible AC Transmission Systems. We show that the decisions regarding which technologies should be used and what locations are to be chosen are not influenced by the strategic behavior of market participants. Additionally, we demonstrate — both analytically and through simulations — that maximizing social welfare as investment criterion complements the objective of mitigating strategic behavior of individual players.