Transmission expansion based on Pareto improvement criterion

Abstract

In the deregulated power industry environment, the transmission expansion issue becomes more complicated. Here, the economics concepts including Pareto optimality, Pareto improvement and social welfare are introduced for seeking the economic rules that should be followed in the transmission expansion thoroughly. Based on the Pareto improvement criterion, the authors propose a generalized model of transmission expansion. In this model, the factors such as the electricity market mechanism and the transmission cost allocation are also involved. Under the market mechanism of locational marginal pricing (LMP), three simple allocation arrangements of transmission cost are presented. Further, to illustrate the implications and the characters of the proposed model and the transmission cost allocation arrangements, a 6-node system study case is analyzed in detail.