Investment in transmission

Abstract

Transmission is an integral part of the electricity system. However, even within a centralised system of generation and transmission it has never been a trivial exercise to perform coordination of expanding loads, generation and transmission capacities in a way that is socially optimal. There are features like lumpy investments, pervasive transmission system externalities, reliability as a public good, and the spatial distribution of both generation and transmission capacities. The unbundling of transmission and generation of newly deregulated electricity systems have substantially increased these coordination problems. To pursue proactive planning the investment decisions of independent generating investors have to be forecasted with sufficient accuracy in order to decide on socially optimal transmission investments. This calls for a systematic use of scenario simulations identifying locational generation investment and corresponding transmission investments. But since investors cannot be forced to invest, incentive schemes must be devised as part of the scenario simulations in order to entice both the right volume and the right location over time.