Optimal investment decisions in transmission expansion

With the introduction of novel technologies in the electricity grid, the conventional decision making framework in the electric power industry needs to evolve to meet the changing need of the industry. This paper presents an optimal decision making framework for comparing investment decisions in new transmission lines and Flexible Alternating Current Transmission System (FACTS). The optimality conditions of the model are derived and the model is implemented on a small 4-bus test system. The results show that under certain cost and operational conditions, investing in TCSC could be a cost-effective supplement to investments in new transmission lines. In addition, control and communication infrastructure could increase the cost-effectiveness of investments in FACTS devices. An analysis of the optimality conditions suggests that the effects of loop flows and parallel line flows have significant impacts on optimal investment decisions in the transmission grid. Therefore, these effects have to be explicitly accounted for in order to develop a new market framework for electricity transmission to provide better incentives for stakeholders to make optimal investment decisions in the electricity grid. This paper illustrates the competing and complementary nature of smart technologies and conventional technologies, and highlights areas for future work.