Transmission Expansion Planning Considering

Economic and Reliability Criteria

Y. Gu, Member, IEEE, M. Ni, Senior Member, IEEE, and Rui Bo, Senior Member, IEEE

eij.max Upper bound on the energy flowing from node i to

Abstract--This paper presents a transmission expansion node j
planning model which combines the advantages of both the eij.min Lower bound on the energy flowing from node i to
traditional reliability-based transmission planning model and node j
economic (also known as value-based, economics-based, or
mij(t) Number of lines invested in year t
market-based) transmission planning model. Reliability-based
transmission planning tries to install new lines at minimal cost nij(t) Total number of in-service new lines by the end of
while fulfilling system reliability criteria. Economic transmission year t
planning, on the other hand, seeks investment opportunities so ηij Efficiency parameter associated with the arc
that network expansions can generate more economic benefits
than the costs. Benders decomposition technique is employed to connecting node i to node j
separate the planning problem into one master problem, which lol Load curtailment penalty factor
makes investment decisions, and two sets of sub-problems, which λi Locational marginal price at node i
evaluate the reliability and economic performance of the electric ri(t) Load curtailment at node i during time t
system, respectively. The proposed model is illustrated on a 5-bus
system. r Discount rate
Index Terms—Reliability, market, Benders decomposition,
transmission expansion planning II. INTRODUCTION

I. NOMENCLATURE B efore the deregulation of the electric industry, vertically

integrated utilities made planning decisions for both the
generation system and the transmission system within
T Set of time periods
their service areas based on various reliability criteria.
M Arcs in the fuel transportation network
Interconnections between neighboring systems were
M’ Arcs in the existing electric transmission network developed primarily for reliability reasons. The advent of
Mn’ Arcs that represent potential lines electricity markets together with organizational restructuring
m Arcs that represent power generation processes have resulted in an unbundling of the long-term planning
d Arcs that represent the electric demand function for generation and transmission systems. In the
N Nodes in the fuel transportation network deregulated world, transmission planning is different from that
in the regulated environment. On one hand there are more
N’ Nodes in the electric transmission network
uncertainties under the restructured market; on the other hand
Bi The set of nodes adjacent to node i the objectives of the two transmission planning approaches are
Gi The set of generator nodes connected to node i different as planning and decision making for generation and
bij Susceptance of branch between node i and node j transmission are carried out by different organizations now
t The tth time period [ 1 ]. What is more, driven by public policies such as
eij(t) Energy flowing from node i to node j through Renewable Portfolio Standards (RPS), there have been major
existing line during period t increases in generation projects located far from load centers,
which outgrows traditional planning standards that focus on
enij(t) Energy flowing from node i to node j through
meeting local demand.
candidate line during period t There are significant transmission bottlenecks in the control
cij(t) Per-unit cost of the energy flowing from node i to areas of Independent System Operator/Regional Transmission
node j during period t Organization (ISO/RTO) in the United States as a result of
dj(t) Supply (if positive) or demand (if negative) at node growths in certain generation technologies, lack of
j, during time t transmission investment, and increased regional interchange
[ 2 ]. Congestions in the transmission system impair the
physical security of the electric system, reduce grid reliability
and prevent the efficient operation of the electric market [3].
Y. Gu, M. Ni, and R. Bo are with the Midwest Independent Transmission Congestions not only reduce the reliability of the system, but
System Operator (MISO), Inc., St. Paul, MN 55108 USA (e-mail: also cause losses in economic value. Inexpensive energy won’t
ygu@misoenergy.org, mni@misoenergy.org, rbo@misoenergy.org). be transferred to locations where energy prices are higher
Disclaimer: The views expressed in this paper are solely of the authors and
do not necessarily represent those of MISO.
because of bottlenecks in the transmission system. In
reliability-based transmission planning, the economic benefits
of new lines and the economic effects of congestions are
usually ignored.
As the congestion level increases, economic transmission
expansion planning becomes attractive to alleviate the excess
cost of it, see [4], [5], [6], [7], [8]. In FERC Order No. 890
issued in 2007, economic transmission planning study is
required in each RTO and TO (Transmission Owner)’s
planning process. Unlike traditional planning approach which
seeks to find the least-cost way to expand the system while
satisfying the reliability constraints during peak-load hours,
economic transmission planning models try to find the
optimum expansion plan for economic justification of network
investment costs with the economic benefits that network
expansions incur. Since then, many ISO/RTOs started to
implement various economic transmission planning
methodologies in their regional planning [9] [10] [11]. For
example, Midwest Independent Transmission System
Operator (MISO) initiated a seven-step planning process in
2006 which includes economic studies as a key component
[12]. In 2011, FERC issued Order No. 1000 which requires
each region to develop a regional transmission plan using a
process that complies with Order No. 890 principles and
coordinate with neighboring regions to identify potential
interregional facilities that may be more efficient or cost
effective. This order, again, will promote the adoption of
economic transmission planning among planning authorities.
Most of the transmission expansion projects are justified on
the ground of enhanced system reliability level or induced
economic benefits. For example, many transmission additions
at the low voltage or distribution levels are mainly for
reliability purpose, while some HVAC and HVDC inter-
regional interconnections are designed to bring economic
benefits to multi-regional electric system. However, there is
no clear distinction between economic projects and reliability
project since transmission expansions inevitably enhance both
the economic and reliability performance to some extent.
While many transmission investments focus on one aspect of
system performance improvement, studies have been made to
assess a new class of transmission expansion projects that not
only enhances the system reliability level, but also brings
significant economic value to the system as well. For instance,
MISO has implemented a new Multi-Value Project (MVP)
Cost Allocation methodology to address the appropriate match
of beneficiaries and costs over time. The MVP projects are
transmission additions that provide regional benefits in
response to energy policies, and/or by providing multiple
regional-level benefits such as increased reliability level
and/or economic value [12].
As the notion of economic transmission planning becomes
popular, transmission planners begin to capture the economic
value of new transmission lines in their planning process.
However, until now, most planning methodologies evaluate
the reliability of the system after an economic transmission
project is identified or evaluate the economic value of a
transmission addition after it is selected based on reliability
criteria. Evaluating the economic values and reliability
impacts of the candidate transmission lines separately will
generate less-than-optimal investment plan as the decision-
making is biased toward one planning criteria. In many
planning studies, based on different transmission planning
criteria, the resulted investment plans might be largely
different. A transmission project designed solely based on
economic criteria might not be able to fix the reliability
problems, while a purely reliability-based project might yield
low economic benefits. In this article, a new transmission
planning method is proposed which considers both the
reliability and economic criteria simultaneously. By
incorporating the two planning criteria, the proposed planning
model can find the trade-off between satisfying reliability
needs and maximizing the economic value of candidate lines.
The proposed planning model considers wholesale
electricity markets with double-sided auctions. The
fundamental economic impacts of a transmission upgrade
include promoting competition and enabling the system
operator to dispatch the generation resources in a more
efficient and economical way. Based on economic theory,
social surplus is a good indicator of how efficiently the market
is working. Thus, it can be used to quantify the economic
benefits of transmission expansions. The proposed economic
transmission planning model will calculate the sum of the
social surplus at each hour of the planning horizon and find a
trade-off between investment costs and the increase in social
surplus incurred by network expansions. Besides maximizing
the economic value of the investment, transmission additions
also need to ensure the reliability of the system. The planning
model adopts the N-1 contingency reliability criterion, which
requires that the transmission system has enough excess
capacity to withstand one major facility outage during peak
hours without thermal violations. N-1 contingency criterion
has been widely used in reliability-driven transmission
expansion planning models as well as system reliability
evaluation models [13] [14].
The economic transmission expansion planning problem is
a large-scale mixed-integer non-linear optimization problem
that requires large computation efforts. In this paper, Benders
decomposition approach is employed to reduce the
computation time. Benders decomposition was first introduced
by J. F. Benders in 1962 to solve mixed-integer programming
(MIP) problems [15]. A. M. Geoffrion later generalized this
method so it can be applied to solve mixed-integer nonlinear
planning (MINLP) problems under some convex and
regularity assumptions [ 16 ]. The Benders decomposition
method, as well as the combination of decomposition
technique with other approaches, has been used in
transmission planning with success [1], [7], [ 17 ]. In this
model, the overall optimization problem is decomposed into a
master problem, which makes investment decisions; and
multiple slave problems, which implement the expansion
plans suggested by the master problem and give feedbacks to
the master problem about the system’s operating conditions.
The remaining sections are organized as follows. Section III
presents the market structure and how the two planning
criteria are derived. Section IV describes the procedures of
transmission expansion planning with both reliability and
economic criteria. Section V provides a numerical example to
highlight the benefits of the methodology proposed. The
conclusions drawn from the study are provided in section VI.
 III. MARKET STRUCTURE AND OPERATION
In this paper, the ISO-managed day-ahead market is
considered, meaning that all transactions are carried out by an
ISO which clears the market for both the generation
companies (GenCos) and load-serving entities (LSEs) [18].
At the beginning of each day, each GenCo submits an
incremental cost and the amount of energy it is willing to sell
and each LSE submits a decremental cost and the amount of
energy it is willing to buy. After receiving offers and bids for
the next day, the ISO then conducts an optimal power flow
based on offers/bids and determines the hourly dispatch
schedules and locational marginal prices (LMPs). In this
paper, we assume that all generators are bidding according to
their marginal cost curves, so strategic bidding is not
considered.
The generator’s cost is generally comprised of three parts:
fuel cost, emission cost, and variable O&M (operation and
maintenance) cost. The fuel cost is decided by the heat rate of
the generator, the fuel price at trading point, and the costs to
transport and store the fuel. In generalized network flow
model, fuel cost can be expressed as the cost of transferring
the flows (fuel) from the supply nodes to the generator. The
marginal cost of generators normally grows with the increase
of power output. The marginal cost curves can usually be
adequately approximated using piecewise linear functions or
step functions. Fig. 1 shows the generator marginal cost curve
and its major components. The marginal fuel cost can be
described using a step function, while the O&M cost is the
average cost over a long period of time so it is fixed. As
shown in the figure, when the generator output is x MW, the
production cost is the sum of areas S0, S1 and S2, which are
variable O&M cost, emission cost, and fuel cost, respectively.
Fig. 1. Generator marginal cost curve
Fig. 2 shows the case where there is only one seller and
one buyer in the market. L1 is the demand curve for the
consumer, while L2 is the marginal cost curve for the
generator. The elasticity of electric demand is considered,
which means that customers are sensitive to the price at which
electric power is sold and will not buy it if the price exceeds
what they expect. In other words, consumers will pay a certain
price, or a certain range of prices, for electric power. In Fig. 2,
the market reached an economic equilibrium at quantity x and
price y. In economics theory, consumer surplus is the area
above the price level and below the demand curve, since the
price that consumers pay is equal to the value of the last unit
of energy (the marginal value). In contrast, producer surplus is
the area below the price level and above the supply curve,
since producers get paid more than their total production cost.
The social surplus is the sum of consumer surplus and
producer surplus, which is essentially area S3 plus S4. For a
market that has multiple participants, we can get the total
social surplus on the figure of the cumulative demand curve
and cumulative supply curve.
Fig. 2. Supply- and Demand-side bidding curves
The energy system is modeled using the generalized
network flow method [19].The basic generalized network flow
problem can be described as follows. Given a network
consisting of a number of nodes and capacitated arcs, we want
to find the optimal routing plan to transfer flows from the
source nodes (supply nodes) to the destination nodes (demand
nodes) at minimum cost without violating the capacity limits.
There are four basic properties associated with each arc: cost
coefficient c, flow efficiency η, lower bound emin, and upper
bound emax. Besides these four properties, many other
properties can also be defined such as generators’ ramp
up/down time, start up/shut down costs, investment cost, lead
time, etc. The convex quadratic cost function of the arc flow
can be linearized by a piecewise linear function or a step
function. Then a single arc can be substituted by multiple arcs,
each representing one segment of the function. In the proposed
model, both the electric system and fuel system are considered
in order to capture the fuel cost of generators directly. In the
proposed model, one generator node is split into a pair of
generator nodes so that operating constraints and O&M costs
can be expressed as the properties of the arc connecting the
two nodes. Generator maximum and minimum output limits
are enforced by constraining the energy flow between the
paired generator nodes.
IV. TRANSMISSION PLANNING MODEL
A. Transmission Planning Considering Two Criteria
The iteration procedures of the new planning model are
shown in Fig. 3. First, the master problem is solved based on
the existing system conditions. At the beginning of the
planning process, the master problem is solved without any
constraint from the slave problems. The output of the master
problem is the investment decisions about when, where and
which lines should be built which will be sent to the sub-
problems. After the investment plan is selected, the economic
benefits evaluation sub-problem is updated based on the
transmission investment plan proposed by the master problem.
Then the problem is solved to simulate the operations of the
market throughout the whole planning scope. A benders
optimality check is conducted to check if the current
investment plan is optimal (in terms of economic benefits) or investments are justified on the grounds of reliability
not. If not, an optimality cut will be added to the master requirements. In reliability-based transmission planning, the
problem. investment decision is made based on snapshots of some
After the economic evaluation sub-problem is done, the operating conditions, such as peak-load hours, or shoulder
reliability evaluation sub-problems are also updated based on load hours and under various contingencies. In this paper, an
the transmission investment plan selected by the master N-1 contingency reliability criterion is adopted. The N-1
problem. The reliability evaluation sub-problems check the contingency criterion means that the system should withstand
adequacy of the electric supply under various contingencies the outage of one major element, such as a line, generator or
for the whole planning horizon. If there is a violation in any transformer. In this paper, we only consider transmission line
slave problem, a Benders feasibility cut is generated and outages.
added to the master problem. 2) Reliability Evaluation sub-problem
If no optimality cut or feasibility cut is added to the master In the slave problem, the impact of the transmission
problem, the current investment plan is optimal and the expansion plan is assessed under worse-case scenarios to
program stops, otherwise the master problem is updated and ensure the system is designed and operated to a certain level of
solved and the iteration continues. In the next iteration, the reliability. As the N-1 contingency criterion is adopted, the
master will be solved with the cuts generated from previous transmission investment must ensure that, under the loss of
iterations. any single equipment, the system won’t have any load
curtailment during peak hours throughout the planning horizon.
Thus, each slave problem is a feasibility check problem, which
checks the reliability of the system under an N-1 contingency.
In each round of iteration, there are w sub-problems, each
representing the outage of one major element in the system.
rj(t) is the slack variable in constraint (2), which balances the
total energy input and total energy output for node j at time t.
If rj(t)>0, it means that there is not enough power to supply
the electric demand. In this case, a portion of the demand
cannot be satisfied and a violation occurs. Zrw is the sum of all
slack variables, and if Zrw >0, it means that violations occur
during the wth contingency. Thus, a feasibility cut is added to
the master problem in order to eliminate the violations. If
Zrw=0, then there are no violations and there is no feedback to
the master problem.
w
Min Zr = ∑ ∑ r j (t ) (1)
t∈T ∀j∈N ∪N '
subject to
∑ ηij eij (t ) − ∑ ( e jk ( t ) + en (t )) + r (t ) = 0 ∀j ∈ N ∪ N ',
jk j
∀i ∀k (2)
∀(ij ) ∈ M ∪ M '∪ Mn ', ∀( jk ) ∈ M ∪ M '∪ Mn '∪ d
w
e (t ) − b h (θ (t ) − θ ( t )) = 0
ij ij ij i j
∀(ij ) ∈ M ' (3)
k w
en (t ) − n (t ) h ( t ) b (θ (t ) − θ ( t )) = 0
ij ij ij ij i j
∀( ij ) ∈ Mn ' (4)
e
ij.min
≤ e (t ) ≤ e
ij ij.max
∀(ij ) ∈ M ∪ M '∪ d (5)
k k
n (t )e
ij ij .min
≤ en ( t ) ≤ n (t ) e
ij ij ij .max
∀ (ij ) ∈ Mn ' (6)
−π ≤ θ ≤ π
i
∀i ∈ N ' (7)
w
where h is 0 if (i, j) is the wth line; otherwise it’s 1.
ij
The operation sub-problem is modeled using the
generalized network flow method. The electric power
Fig. 3. Transmission planning considering both economic benefits and generation/transfer are considered as energy flows in the
reliability requirement
system. The prices of different kinds of fuels at the fuel
B. Reliability Evaluation Sub-problem production side, such as wellhead natural gas prices and spot
1) Reliability-based Transmission Planning prices of coal in different coal-producing regions, are included
The objective of the reliability-based transmission in the cost properties of transportation arcs. Equation (2)
expansion planning is to find the least-cost alternative to serve shows that for each node, the sum of flows into the node
the loads of all existing and future customers reliably. Capital minus the flows out of the node equals the demand (or supply
if negative) of the node. Equations (3) and (4) calculate the will generate a feasibility cut only when its optimal objective
flow in existing and newly installed lines, respectively. Arc value is higher than zero.
flows and power angles must be within constraints, as shown
Min Z = ∑ (1+ r )−t ( ∑ r j (t )lol
in constraints (5), (6) and (7). Constraint (5) exerts constraints t∈T ∀j∈N ∪ N '
on flows in the existing network; Constraint (6) exerts (8)
constraints on flows in the potential lines. If no new line is + ∑ Sij ( eij (t )) − ∑ Dij ( eij (t )))
installed in time t, nij(t) is 0, then enij(t) is also 0. For the fuel (i , j )∈m (i , j )∈d
transportation network, arc flows should be larger than or e (t ) − b (θ (t ) − θ (t )) = 0 ∀(ij ) ∈ M ' (9)
equal to zero, whereas in the transmission network, arc flow ij ij i j
can be negative to account for the bidirectional nature of the k
en (t ) − n (t )b (θ (t ) − θ (t )) = 0 ∀(ij ) ∈ Mn ' (10)
power flow. ij ij ij i j
k k
C. Economic Benefits Evaluation Sub-problem n (t )e
ij ij .min
≤ en ( t ) ≤ n (t ) e
ij ij ij .max
∀ (ij ) ∈ Mn ' (11)
1) Economic Transmission Planning
∑ ηij eij (t ) − ∑ (e jk (t ) + en (t )) + r (t ) = 0 ∀j ∈ N ∪ N ',
The principle of economic transmission investment is based ∀i ∀k
jk j (12)
on the premise that an efficient investment might yield ∀(ij ) ∈ M ∪ M '∪ Mn ', ∀ ( jk ) ∈ M ∪ M '∪ Mn '∪ d
sufficient economic benefit. In many economic planning
models, in order to capture the fundamental economic benefits e
ij.min
≤ e (t ) ≤ e
ij ij.max
∀(ij ) ∈ M ∪ M '∪ d (13)
of circuit installations, various expansion criteria are defined, (14)
−π ≤ θ ≤ π ∀i ∈ N '
such as production costs [5], flatness of price profile [1], i
congestion rent [4], redispatch cost, etc. According to [8], As shown in Fig. 2, if we assume the intercept and slope of
promoting market efficiency is one of the major objectives of consumer bidding curve for ( i , j ) ∈ d are pij and qij
the electric market framework. In the proposed planning respectively, the total consumer benefit Dij(eij(t)) is:
model, social surplus is used as the economic evaluation 2
criterion as it is the primal measure of the efficiency of a D ( e ( t )) = p e (t ) + q e (t ) / 2
ij ij ij ij ij ij
(15)
market. From the social welfare perspective, a transmission In the same way, the total production cost Sij(t) can also be
investment can be justified economically if the total social expressed as a function of eij(t). Note that in Fig. 2, the
surplus increase caused by the investment is higher than the consumer bidding curve and generator marginal cost curve are
cost of the investment itself. However, the two values are hard expressed as a linear function and a step function,
to compare in that while investment cost is incurred at a respectively. However, as long as the total consumer payment
certain time and can be considered as present value at the and generation cost are quadratic functions, the problem can
beginning of the planning horizon, social surplus occurs at be solved, e.g. the consumer bidding curve can be a piece-wise
every time step. So in the economic benefits evaluation sub- linear curve or step curve.
problem, social surplus must be calculated at every time step In order to encapsulate the load duration characteristics of
throughout the planning horizon, and then be converted to the the demand, load is represented as yearly load duration curves
present value for comparison purpose. (LDCs). An LDC plots the number of hours (percentage of
2) Economic Benefits Evaluation sub-problem hours per year) that the load equals or exceeds a given level of
The economic benefits evaluation sub-problem tries to demand. Compared to simulating the system chronologically,
minimize {social cost plus loss of load penalties}, where LDC helps to reduce the computation time.
social cost is the negative of social surplus.
The major differences between the economic benefits D. Master problem
evaluation sub-problem and the reliability evaluation sub- In the planning problem, while generally more circuit
problem are that: (1) The former tries to minimize the social expansions will promote the efficient operation of the electric
costs by conducting optimal power flow (OPF), while the market and increase the social surplus, they also means more
latter tries to check if there is any load curtailment; (2) The investment cost. The master problem tries to find a trade-off
former needs to calculate the economic value introduced by between high investment cost and increase in social surplus.
circuit additions throughout the planning horizon, which The objective function is the minimization of social costs
means it needs to optimize the operations of system either (investment costs minus social surplus), which is the same as
chronologically or under a set of typical conditions that can maximization of social surplus minus investment costs.
approximate the hour-by-hour load levels, while the latter only Constraint (18) is the optimality cut from the economic
needs to check violations during some snapshot hours of each benefits evaluation sub-problem; while constraint (19) is the
year; (3) The former is a quadratic programming problem as feasibility cut from the reliability evaluation sub-problem.
the double-sided bidding is considered, while the latter is a These two types of constraints force the master problem to
linear programming problem; (4) There is only one slave select an economic transmission investment plan that satisfies
problem in economic planning, while there are w slave the reliability criteria. Equation (20) updates the total number
problems in reliability-based planning, each representing a of lines between i and j.
contingency in the system; and (5) The economic benefits −t ∗
Min ∑ ∑ (1+ r ) Iij mij (t ) + Z (16)
evaluation sub-problem will generate an optimality cut to the t∈T ( ij )∈Mn '
master problem, while each reliability evaluation sub-problem
∗
Z ≤ 0 (17)
 ∗ k
k k
Z ≥ ∑ ∑ δij (t )(nij (t )−nij (t )) + Z
t∈T (ij )∈Mn '
kw k kw
∑ ∑ δij (t )(nij (t )−nij (t )) + Zr ≤0
t∈T (ij )∈Mn '
n (t ) = n (t − 1) + m (t − a )
ij ij ij
0 ≤ m (t ) ≤ mij
ij
0 ≤ n (t ) ≤ nij
ij
k
where Z is the optimal value of the slave problem in the kth
iteration and δij is the sensitivity of the optimum value Z with
respect to the decision variable nij derived by Romero and
Monticelli [20]. δij can be expressed as (23).
δ ij (t ) = − Bij (θi (t ) − θ j (t ))(λi (t ) − λ j (t ))
V. ILLUSTRATIVE EXAMPLES
To evaluate the methodology presented above, a 5-bus
system has been considered. Fig. 4 shows the network diagram
of the integrated energy system, which has three integrated
gasification combined cycle (IGCC) power plants, one natural
gas combined cycle (NGCC) power plant and an oil-fueled
power plant. The fuel subsystem which includes four fuel
suppliers and eight fuel transportation lines is also considered.
Fuel transportation arcs X5 and X6 do not exist at the
beginning of the planning horizon. They will come into use at
year 2 and year 5, respectively. The network data for this
system is given in [21]. Emission cost is not considered.
Fig. 4. Five-bus system
The expected values of the natural gas price and oil price
escalate at a rate of 4% per year, while the coal price has a
growth rate of 2% per year. The coal price is determined
mainly by long-term contracts, and coal supply is less
dependent on import than oil and natural gas, so the coal price
tends to be stable.
The transmission expansion planning is carried out on this
system for a planning horizon of 10 years. Annual LDC curves
are used to reduce the computation time. Investment decisions
can only be made at the beginning of each year.
In order to illustrate the differences between the proposed
planning model and reliability-based/economic planning
models, all three models are applied on this test system. The
simulation results generated by the three planning methods are
shown in Table I.
TABLE I
(18) INVESTMENT PLANS MADE BY THE THREE PLANNING METHODS
(19)
(20)
(21)
(22)
In order to reduce the present value of investment cost,
reliability-based planning will not invest new lines until they
are needed for reliability purpose. Because of the discount
rate, the later the investment is made, the smaller the present
value of the investment is. Economic planning, however, tries
to find the opportunities to invest new circuits that can bring
(23) more social surplus than their costs. The test system is highly
congested, so economic planning model tends to build new
lines at the beginning of the planning horizon in order to get
more economic benefits. Line 4-5 and line 3-4 are the only
two lines connecting bus 4 with the rest of the system. As the
capacity of the generator in bus 4 is much lower than the
demand, a lot of electric power needs to be transferred from
the other buses. So the two lines become congested as the load
grows over time and new lines need to be installed in order to
supply the demand. The LMP in bus 2 is the lowest in the
system. However, the low-cost energy from generator 2
cannot be transferred to bus 4 in that line 1-2 and line 3-4 are
highly congested. Thus, the economic transmission planning
model will invest new lines on arcs 1-2 and 3-4 in order to
relieve congestion, reduce congestion cost, and as a
consequence, increase social surplus. Note that the candidate
line 3-4 is selected by both the reliability-based planning and
economic planning which shows that there is no clear
distinction between reliability projects and economic projects.
The main drawback of economic transmission planning
method is that no rigorous reliability constraint is considered.
The proposed planning model, however, can maximize the
economic value of transmission investment while satisfying
the reliability criteria.
TABLE II
COMPARISON OF THE RESULTS OF THE TWO PLANNING METHODS
As shown in Table II, all three planning methods increase
the social surplus as all of them reduce the congestion in the
system. Economic transmission planning has a smaller
investment cost than that of reliability-based planning, yet it
generates a higher social surplus. The proposed planning
model considers a trade-off between two planning criteria so
the total {social surplus – investment cost} is higher than that
of the reliability-based planning and lower than that of the
economic planning.
The test system is highly congested, so there are many
investment opportunities. What is more, as the system is
small, most candidate lines are beneficial in terms of both
system reliability and economic value. In some large systems,
economic transmission planning often selects high-capacity
long-distance transmission backbones to deliver low cost
energy from one area to another; while reliability-based
planning often selects low-cost lines to fix the local reliability
violations. Generally speaking, economic transmission
projects are more expensive than reliability projects. As the
proposed planning method combines both the “top-down” and
the “bottom-up” planning approaches, a mixed portfolio of
reliability projects and economic projects will be invested.
While intensive studies have been done on expanding the
electric transmission system, how congestions in the fuel
delivery network interact with those in the electric system has
not been given enough attention. Just like congestions in the
electric system, congestions in the fuel transportation lines
will also cause differences in nodal prices and prevent the
efficient transportation of fuel resources. Because of economic
interdependencies between the fuel system and electric
system, investments in the fuel system will have a profound
impact on the electric system. So it makes sense to include
fuel transportation network investments as decision variables
in the overall planning problem. This model can help decision
makers carry out analyses on this issue and get a better
understanding of it.
VI. CONCLUSION
In this paper, a new transmission planning model which
considers both the economic value of the transmission
investment and the reliability of the system is proposed.
Currently, many planning entities conduct reliability-based
planning and economic planning separately. While various
methodologies are employed to capture the economic value of
the candidate transmission lines in their planning process, the
reliability evaluation is not conducted simultaneously with the
economic evaluation. The candidate line with the highest
economic value might have little or even negative impact on
system reliability. On the other hand, in reliability-based
planning, the objective is to address reliability requirement in
a minimal-cost way. The lowest-cost option might not bring
the highest economic value and the lowest overall cost in the
long run. For example, up-sizing reliability projects or
selecting more expensive alternatives might capture extra
economic benefits, such as congestion reduction, renewable
integration, enhanced market efficiency, etc. The proposed
planning model can evaluate a whole set of candidate line
based on both economic criterion and reliability criterion, and
select a hybrid transmission investment plan that fulfills
reliability constraints while maximizing the economic value.
As most transmission additions have both reliability and
economic impacts on the system, the proposed planning model
can find candidate lines that are trade-offs between the two
aspects, i.e. those candidate lines that are neither the lowest-
cost reliability projects nor the most valuable economic
projects might be selected by the proposed model as they
provide the best combinations of reliability and economic
benefits.
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XI. BIOGRAPHIES
Yang Gu (S’07, M’11) received the B.S. degree in Electrical
Engineering from Shandong University, Jinan, China, in 2007, and
the Ph.D. degree in Electrical Engineering from Iowa State
University, Ames, IA, in 2011. He is currently an Economic Studies
Engineer at MISO. His main areas of interest are power system
capacity expansion planning, optimization theories, power system
operation, balancing, day-ahead, and ancillary services markets.

Ming Ni (M’ 1998, SM’ 2005) received his B.S. and Ph.D. degrees
in Electrical Engineering in 1991 and 1996 respectively, from
Southeast University of P.R. China. He is now the Manager of
Economic Studies in MISO. His primary responsibilities involve the
economic assessment of transmission upgrade, and other electricity
market related economic analysis.

Rui Bo (SM’10) received the B.S. and M.S. degrees in electric power
engineering from Southeast University (China) in 2000 and 2003,
respectively, and then his Ph.D. degree from University of
Tennessee, Knoxville, TN in 2009. He worked at ZTE Corporation
and Shenzhen Cermate Inc. from 2003 to 2005, respectively. Since
2009, he has been employed at MISO as an Economic Studies
Engineer.