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Optimal transmission switching: economic efficiency and market implications

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Abstract

Traditionally, transmission assets for bulk power flow in the electric grid have been modeled as fixed assets in the short run, except during times of forced outages or maintenance. This traditional view does not permit reconfiguration of the transmission grid by the system operators to improve system performance and economic efficiency. The current push to create a smarter grid has brought to the forefront the possibility of co-optimizing generation along with the network topology by incorporating the control of transmission assets within the economic dispatch formulations. Unfortunately, even though such co-optimization improves the social welfare, it may be incompatible with prevailing market design practices since it can create winners and losers among market participants and it has unpredictable distributional consequences in the energy market and in the financial transmission rights (FTR) market. In this paper, we first provide an overview of recent research on optimal transmission switching, which demonstrates the substantial economic benefit that is possible even while satisfying standard N−1 reliability requirements. We then discuss various market implications resulting from co-optimizing the network topology with generation and we examine how transmission switching may affect locational Marginal Prices (LMPs), i.e., energy prices, and revenue adequacy in the FTR market when FTR settlements are financed by congestion revenues.

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Abbreviations

g :

Generator

g(n):

Set of generators at bus n

k :

Transmission element (line or transformer)

k(n, .), k(., n):

Set of transmission elements with bus n as the to bus and the set with bus n as the from bus respectively

m, n :

Nodes

B k :

Susceptance of transmission element k

c g :

Production cost for generator g

d n :

Real power load at node n

G k :

Conductance of transmission element k

M k :

Big M value for transmission element k

\({P_{g}^{\rm max}, P_{g}^{\rm min}}\) :

Max and min capacity of generator g

\({P_{k}^{\rm max}, P_{k}^{\rm min}}\) :

Max and min rating of transmission element k; typically \({P_{k}^{\rm max}= -P_{k}^{\rm min}}\)

θ max, θ min :

Max and min bus voltage angle difference; typically θ max =  − θ min

P g :

Real power supply from generator g at node n

P k :

Real power flow from node m to node n for transmission element k

Q k :

Reactive power flow from node m to node n for transmission element k

V n :

Bus voltage at node n

z k :

Binary switching variable for transmission element k(0 open/not in service, 1 closed/in service)

\({\phi_{k}}\) :

Bus voltage angle difference across transmission element k

θ n :

Bus voltage angle at node n

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Authors and Affiliations

  1. School of Electrical, Computer, and Energy Engineering, Arizona State University, 579 Engineering Research Center, Tempe, AZ, 85287, USA

    Kory W. Hedman

  2. Industrial Engineering and Operations Research Department, University of California at Berkeley, 4135 Etcheverry Hall, Berkeley, CA, 94720, USA

    Shmuel S. Oren

  3. Office of Energy Policy and Innovation, Federal Energy Regulatory Commission, 888 1st St. NE., Washington, DC, 20426, USA

    Richard P. O’Neill

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  1. Kory W. Hedman
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  3. Richard P. O’Neill
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Correspondence to Kory W. Hedman.

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Hedman, K.W., Oren, S.S. & O’Neill, R.P. Optimal transmission switching: economic efficiency and market implications. J Regul Econ 40, 111–140 (2011). https://doi.org/10.1007/s11149-011-9158-z

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