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Facilitating Renewable Energy in a Wholesale Market by Expanding Transmission

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Stephen Boyd, Electrical Engineering; Mark Thurber, Program on Energy and Sustainable Development; Frank Wolak, Economics and PESD

This project identified and quantified the economic benefits and costs of expanding a transmission system operating in a wholesale power market. Transmission expansions benefit from increasing the competition that strategic suppliers face for their output. Suppliers offer electricity to the wholesale market at prices closer to their variable cost of production. The researchers performed a cost/benefit analysis for Alberta’s wholesale power market. The analysis found positive net benefits for transmission upgrades that would not be built without accounting for this source of benefits, as described in the paper below. Also, the researchers found that the intermittent nature of renewable resources such as wind and solar energy increases the expected magnitude of the competitiveness benefits. They are concerned, however, that as the share of renewable resources on a given system increases, economically beneficial expansions will not be undertaken if this source of economic benefits is not accounted for in the transmission planning process. The researchers worked closely with the Alberta Electric System Operator on this project.

The researchers also examined a zonal pricing market where transmission congestion is explicitly priced. Using data from Australia’s national power market, they are implementing an enhanced version of their previous methodology to quantify the competitiveness benefits of several proposed transmission expansions in Australia. This research extends their methodology to nodal pricing markets in the United States and includes subsequent economic benefits in the transmission planning process.

Publications and media

“Measuring the competitiveness benefits of a transmission investment policy: The case of the Alberta electricity market” Energy Policy 85 (2015): 426-444.

Awarded 2010 as part of the TomKat's Smart Grid: Sustainable Grid Efforts.