1

Transmission Network Expansion Planning in

the Competitive Environment,
A Reliability Based Approach
Seyed Mohammad Ali Hosseini

Abstract-- Transmission network plays a pivotal role in the

liberalised power markets. In fact, the necessary fair
environment due to competition for the participants in the power
market would be provided only by a suitable and well-designed
transmission network. In this context, transmission network
expansion planning studies play an important role to optimally
address this issue. Although extensive studies have been done in
this area, each has its relative strengths and weaknesses
depending on the scope of the study reflected on the objective
function of the planning problem. The objective function of the
transmission network expansion planning proposed in this study
is to minimize the expected value of interruption cost in the
network for different consumer segments, while satisfying the
security constraints of the system, i.e. - transmission lines
capacity, generation capacity, and upper and lower bounds of
bus voltages. The solution is to improve the transmission network
reliability taking into account the rate of uncovered consumer
segments due to the lack of transmission capacity and finding the
optimum alternatives of the transmission network expansion.
The proposed methodology includes two steps as; Finding the
existing candidates for transmission network expansion
contributing to improve the transmission network reliability and
Analysing the selected candidates for optimality according to the
proposed objective function. The IEEE Reliability Test System
(IEEE RTS) considered as a case study. Results show that the
industrial customers, which have higher interruption costs in
comparison to the household loads, require higher reliability
levels and more redundancy.

Index Terms-- Transmission network expansion planning,

liberalised power markets, optimization, uncertainties, system
reliability, network security, constraints, power market and
costumers interruption cost.

been decided by the private subsystems. These changing

issues have caused more complications in power systems
operational studies and of course power system planning as
well. Transmission network is among one of these parts which
are affected by the changes. The transmission network in the
deregulated market plays a vital role in the creation of the nondiscriminatory and competitive environment.
Market deregulation has made huge challenges throughout
the transmission network expansion planning and whereupon
many complexities have been caused by it.
From the planning point of view, transmission network
expansion planning in the deregulated market is essentially
different from the traditional market in both uncertainty and
aim aspects. Deregulating, based on its properties has caused
changes in the transmission network expansion planning in
order to meet the necessary load in the system. Decreasing
cost, taking into account the reliability of the system has been
the main purpose of the transmission expansion planning in
the traditional market. With the deregulating market, the main
purpose has been changed to a non-discriminatory and
competitive environment for all players with keeping the
reliability of the system too. Clearly it could be seen that
deregulating has caused increasing in the related uncertainties
and even has caused some new categories of uncertainties. [13].
This paper is organized as follows. Section II presents existing
transmission expansion planning algorithms in the deregulated
environment. Section III describes proposed methodology.
Section IV depicts the case study together with the related
results. Section V presents sensitivity analyses and the
corresponding results. Conclusion is presented in section VI.

II. TRANSMISSION NETWORK EXPANSION PLANNING

I. INTRODUCTION

eregulation in the power market has caused a great

change in the relations and attitudes of the different parts
in power systems. Due to changes in the rules, different parts
of the power system would have gone out of the network
management control and as the consequence they would have
The author is with the Department of Electric Power Engineering,
Norwegian University of Science and Technology (NTNU), Trondheim NO7491, Norway.
Email: Seyed.Hosseini@ntnu.no

Minimizing the total revenue to implement a resource plan

is the planning objective in a regulated environment and it is
basically a least-cost planning approach. Planners normally
have the power system data required for expansion planning,
such as demand forecasts, fuel prices, existing generators,
existing and planned resources and the required financial
return on investment because of regulations.
However due to deregulation of the industry not all of this
information is now available to transmission-system planners.

Because of the deregulation of power industry, it has resulted

in the separation of the industry into generation, transmission
and distribution entities. Maximizing the profits is what the
developed generation providers compete in the open electricity
market.
To ensure open access and competitiveness in the market
place, the operation and management of the industry are
designed. Expansion planning should now include their
market impacts in the decision-making process, since
transmission and other various ancillary services are now
commodities. Since the private sector is becoming
increasingly involved in the industry, in addition planning is
no longer dominated by system operators [1, 4].
The traditional planning approach is now no longer
appropriate in this new era, since the significant change in
stakeholder profiles is resulting in changes in the planning
process. Therefore expansion-planning modelling should now
consider not only the investment level but also market
prospects created by the expansion. Private investors who tend
to have market oriented objectives have a great interest in this.
As an example to propose a planning method capable of
meeting the challenges arising from deregulation, we use the
transmission network expansion planning problem. The
proposed market-oriented planning approach will maximize
the overall social benefit of expansion projects, based on the
traditional methods, which is consistent with the ultimate goal
of the deregulation. Market needs are the factors that are
driving Transmission planning with the proviso that certain
constraints such as reliability, security and economic factors
are satisfied. Different planning processes are already being
used. To demonstrate current thinking on how to deal with the
challenge of transmission planning in a deregulated
environment, some of the typical practices are reviewed [1, 3].
In methods utilized for transmission expansion planning in
literature, low attentions had been devoted to system reliability
constraints and especially economic impacts of system
reliability and security for consumers. In present paper, both
economic aspects of system reliability and market open access
are modeled and penetrated in optimization objective function.
Interruption cost is index used to model system reliability
impact on transmission expansion planning studies.

III. PROPOSED METHODOLOGY

In this section, the proposed method for transmission
expansion planning in the deregulated environment is
provided. As identified in the literature survey, many methods
developed for transmission network expansion planning utilize
two steps: first generating initial candidate's pool and then
applying optimization programs on it. In the second step,
selecting the best proposed candidates is considered as a final
response.
A. Selection of Candidate Circuits
The first step in the proposed methodology is the
formulation of an initial candidate pool for expansion that is

based on information about a given system such as the

generation and transmission capacity, the estimated
transmission tariffs for new circuits, the planning horizon and
corresponding forecasted system demand etc. To ensure its
compliance with practical engineering and management
considerations, both a planners experience and rules for
guidance are needed, which may include but need not be
limited to [5]:

Network redundancy;
Environmental factors;
Financial limits;
Estimated construction time of lines and the time
horizon of the planning.

The pool is formulated in such a way as to have redundant

transmission lines as required for system reliability in the first
place. By examining the investment requirements and
construction periods of individual lines, a number of
candidates can be dropped at this stage in order to avoid an
excessive workload in the following steps. By taking into
account environmental factors, a further reduction in the pool
size can be made. As an instance; a line should not be
constructed through an important nature reserve [6-10].
B. The Optimization Model
Once the pool of candidate circuits is formulated, the second
step is to model the decision process for the expansion
planning.
Optimization process utilizes genetic algorithm optimization
as a powerful tool in such studies [11-14]. Identified the novel
approach in this paper is to model all relevant parameters in
expansion planning, including reliability indices of customers
supply, market operators' need for open access market and
investment costs. Based on these facts, optimization goal
function can be defined as below:

F = min [ Investment Cost ( IC ) +

Damage for market close access +
Interruption Costs ]

(1)

Investment costs are costs to installation of new transmission

lines and substations. The two after parameters can be
evaluated as described in equations (2) and (3).
Damage caused by market malfunction in providing open
access for all market operators. When a customer supply is
constrained by transmission network limitations, market spot
price and Local Marginal Price (LMP) in networks islands can
be counted as a good tool for modelling this damage. Damage
for market close access for customer i can be evaluated by
equation (2).

Damage for market close accessi =

[ Spot Pricei LMPi ]

( 2)

f1 =

Where:
LMPi
Spot Pricei

f 3 = Di EENSi

Subject to:

EENST EENS R

(4)

RoRl MARR

Riskl < Risk R

(5)

Where,
IC
j
n

EENSi = Li Pi 8760
i =1

(1 + j ) n

f 2 = ( Spot Price LMPi )

Local Marginal Price that is unique for

each network island in congestion,
Total price of power/energy in all over the
network.

The other factor we focus on is reliability indices impact on

transmission expansion planning. To model reliability indices
on economic parameters and including it in economic analysis,
Expected Energy Not Supplied (EENS) is an appropriate
alternative. Interruption costs in system studies are usually
evaluated in energy factors. These factors can be evaluated in
the procedures that are not beyond the scope of the present
research. Results are usually presented in $/kWh or $/MWh
orders.

IC

initial costs in $
interest rate
transmission system useful life time in year

Equation (4) states the system operation constraints, such as

i =1

(5) represents the system reliability constraints, such as:

Maximum risk allowed and maximum EENS level.

Interruption Costs = Di EENSi = Di Li Pi 8760 (3) voltage limitations, equipment capacity etc., while equation

Where:
Li
Pi
Di

average customer load in MW or kW

customer probability of interruption (this
parameter can be evaluated by reliability
studies)
average customer interruption cost in
$/MWh or $/KWh

Above formulations can be implemented in optimization

tools provided by software products. Main functions
implemented in genetic algorithm are presented below:
f1, f2, and f3 are the main components of the objective
function. f1 denotes for investment costs associated with
transmission network expansion planning. f2 represents for
incremented cost due to transmission lines congestion. f3 is
representative for interruption costs caused by transmission
system outages.

F = min [ f1 + f 2 + f3 ]
Where:

Proposed methodology is applied to a standard test system

which is IEEE Reliability Test System (RTS). Results are
provided in the next section.

IV. CASE STUDY

The proposed formulation about transmission expansion

planning is applied to RTS and results are presented in this
section. 24-bus RTS single line diagram is illustrated in Figure
1. RTS technical data is provided in reference [25].
The first step as discussed in the introduction has been done in
the previous studies. Initial candidate pool for expansion
planning is provided in [15-18].

4
Investment- Congestion Cost Compromise Area

350
300

Congestion (M$)

250
200
150
100
50
0
-50
0

20

40

60

80
100
Investment (M$)

120

140

160

180

Fig 2. Congestion costs trajectory within increase in investment costs

Figure 3 shows absorbed investments trajectory when

investments changes from 0 to 180 million dollars. As seen in
the figure, when investments increase, private sector trends to
engage in the market and absorbed investments begin to
increase as well.
Investment- Absorbed Investment Compromise Area

70

Fig 1. IEEE Reliability Test System, Single line diagram

Absorbed Investment (M$)

60
50
40
30
20
10

Several transmission expansion plans with different initial

costs were proposed for the test system. Proposed alternatives
were sorted with respect to the investment costs. Congestion
costs, absorbed investment and EENS trajectory when
investment costs are increased from 0 to 180 M$ were
evaluated. Results are provided in Figures 2 to 4.
Figure 2 shows congestion costs trajectory when investments
changes from 0 to 180 million dollars. As seen in the Figure 2,
when investments increase, congestion costs begin to
decrease.

0
0

20

40

60

80
100
Investment (M$)

120

140

160

180

Fig 3. Absorbed investment trajectory within increase in investment costs

Figure 4 shows the EENS trajectory versus investments

variation from 0 to 180 million dollars. As seen in the figure,
investments and system adequacy are correlated. Therefore
system reliability indices begin to be improved. It is obvious
that the result is decrease in system interruption costs
according to increase in investments.
4.5

x 10

Investment- Reliability Index Compromise Area

4
Reliability Index- EENS(MWh)

Here, proposed method for optimization program and making

decision for selection of the best candidate among proposed
initial candidate is applied to RTS system with load growth
provided in [19-24] which is modelled by Normal (Gaussian)
distribution.

3.5
3
2.5
2
1.5
1
0.5
0
0

20

40

60

80
100
Investment (M$)

120

140

Fig 4. Expected value for Energy Not Supplied (EENS)

Trajectory within increase in investment costs

160

180

Investment Needed for TEP (p.u.)

As discussed later, response is highly dependent to consumers

load growth, required reliability level and freedom in power
market. So in the next section, response sensitivity to these
parameters is analysed. As regard, customer interruption costs
in $/MWh or $/kWh, EENS trajectory can be quantified into
economic parameters. Reliability factor impact on total goal
function is extensively dependent to customer average
interruption cost.

3.5

2.5

1.5

1
0

In this section, response sensitivity to load growth, required

reliability and freedom in power market is analysed.
Consumers with high priority in power supply have more
interruption costs. Response trajectory when interruption costs
are increased from 200 $/MWh to 1000 $/MWh is shown in
Figure 5. Results are per-united base on 200 $/MWh.
Results show that for consumers with high priorities, more
investments are needed and it is required to have more
investments to decrease system EENS and improve power
quality as well as reliability indices.

60
80
100
120
140
Difference Between Spot Price and LMP (%)

160

180

200

Response Sensitivity Analysis (Per Unit)

1
0.95
Investment Needed for TEP (p.u.)

Investment Needed for TEP (p.u.)

40

When long-term load forecasting results are provided in

Normal distribution model and standard deviation can change
in wide range, better estimation can result in more efficient
transmission expansion planning. Figure 7 shows the response
trajectory against the load growth normalized standard
decrease from 0.02 to 0.5. Response sensitivity analysis results
are per-united based on 0.02 standard deviation in this figure.
Results show that load forecasting precision impacts on
investment costs. Costs can be decreased to 10% with
improved load forecasting methods.

Response Sensitivity Analysis (Per Unit)

2.6
2.4
2.2
2
1.8
1.6
1.4

0.9
0.85
0.8
0.75
0.7
0.65
0.6
0.55

1.2
1
200

20

Fig 6. Response Trajectory within change in consumer need for freedom

V. SENSITIVITY ANALYSIS

2.8

Response Sensitivity Analysis (Per Unit)

0.5
0

300

400

500
600
700
Interruption Costs ($/MWh)

800

900

1000

Fig 5. Response Trajectory within increase in interruption costs

The difference between spot price and LMP is higher for the
customers with higher need for freedom in the power market.
Response trajectory when difference percentage between spot
price and LMP are increased from 0 % to 200% is depicted in
Figure 6.
Results show that for consumers with high need for freedom,
more investments are needed. It is also required to have more
investments to decrease the difference between spot price and
LMP, and to improve power market performance.

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Load Forecasting standard deviation

Fig 7. Response Trajectory within change in load growth precision

Response sensitivity analysis shows paper claim about

dominance of reliability indices in transmission network
expansion planning. Customers interruption cost is a dominant
factor in transmission network expansion planning economic
studies.
So, methods developed in this paper can result in more
economic achievements in transmission expansion planning
studies provided before in literature.

VI. CONCLUSION

This paper presented a new long-term transmission

expansion planning approach in competitive electricity
markets in which the generation sector was deregulated while
the transmission sector had remained regulated. This paper

0.5

was motivated with the fact that in such markets, the system
operator is responsible to efficiently plan the future
transmission expansions to ensure not only system
investments and competitive market operation, but also system
reliability and adequacy and a fair and competitive market
operation. Both were modelled as economic parameters.
Objective function was defined in terms of model investment
costs, system interruption and congestion costs. Results
provided above show different consumers behaviour with
different priorities in power supply in need of different
reliability indices to be satisfied. Investment costs needed for
appropriate transmission expansion planning sensitivity were
analysed in depth and results presented. Results show that for
different customers with different priorities in power supply or
different interruption costs, there are huge differences in
economic parameters in transmission expansion planning
methods.

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[4]

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VIII. BIOGRAPHIES
Seyed Mohammad Ali Hosseini was born in Iran,
on August 04, 1983. He received both B.Sc. and M.Sc.
in electrical power engineering in 2005 and 2008
respectively. Currently he is pursuing the Ph.D. degree
in the area of power system analyses and transmission
planning in a competitive environment at the
Department of Electric Power Engineering, Norwegian
University of Science and Technology (NTNU),
Trondheim, Norway.