Formulation of incentives for decentralized transmission asset investments

This paper presents an incentive scheme to encourage private investment in the improvement and expansion of the transmission in the competitive electricity market environment. Without incentives, the necessary enhancements to the existing grid would not go forward. To create these incentives, we propose a decentralized transmission asset investment model, where the new assets are built by private investors. The incentives are based on value added to the social welfare through each asset investment. By viewing each potential investor as a player in a cooperative game we use the Shapley value on a unique equitable basis to reward investors according to the added value that they create. We apply our methodology to the Garver 6-bus system and the IEEE 24-bus RTS to illustrate the capability and flexibility of the decision support system that we propose.