A mechanism for expansion of electricity transmission grid in PJM (USA)

Abstract

The thesis presents an application of a mechanism that would provide adequate incentives to promote the transmission network expansion in the area of the US electric system known as PJM. The mechanism applied combines the merchant with a regulatory approach. It is based on rebalancing of a two-part tariff in the framework of a wholesale electricity market with nodal pricing, and the expansion of the network is carried out through the sale of financial transmission rights for the congested lines. The mechanism is tested for 14-node and 17-node geographical coverage areas of PJM. Under Laspeyres weights, it is shown that the nodal prices converge to the marginal cost of generation, the congestion rent decreases, and the total social welfare increases. The mechanism is shown to adjust prices effectively given either non-peak or peak demand.