Transmission augmentation with mathematical modeling of market power and strategic generation expansion - Part I

Mohammad R. Hesamzadeh*, Darryl R. Biggar, Nasser Hosseinzadeh, Peter J. Wolfs

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

32 Citations (Scopus)


This paper proposes a new mathematical structure for evaluating the economic efficiency of transmission investment in a liberalized electricity market. The problem faced by a transmission planner is modeled using the concept of social welfare from economics. The behavior of generators is modeled as the Nash equilibrium of a strategic game. The Nash solution concept is reformulated as an optimization problem and a new concept - the Stackelberg-Worst Nash equilibrium - is introduced to resolve the problem of multiple equilibria. The proposed structure can take into account the effects of a transmission augmentation on both market power and strategic generation investment. Accordingly, the optimal solution to the transmission planner's problem may allow additional transmission capacity both to reduce market power and to defer investment in the generation sector. A methodology is proposed to decompose the benefits of a transmission augmentation policy into the efficiency benefit, competition benefit, and the deferral benefit. The outcomes of the proposed approach to transmission augmentation are compared with the outcomes of two other approaches to transmission augmentation using a simple three-bus network example.

Original languageEnglish
Article number5771584
Pages (from-to)2040-2048
Number of pages9
JournalIEEE Transactions on Power Systems
Issue number4
Publication statusPublished - Nov 2011


  • Game theory
  • Nash equilibria
  • generation investment
  • market power
  • transmission network planning
  • transmission system augmentation

ASJC Scopus subject areas

  • Energy Engineering and Power Technology
  • Electrical and Electronic Engineering


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