The HRV Model for Optimal Expansion of Transmission Networks: An Application to the Ontario Electricity Grid

Abstract

This paper presents the application of a mechanism that provides incentives to promote transmission network expansion in the electricity system of the Ontario province. Such mechanism combines a merchant approach with a regulatory approach. It is based on the rebalancing of a two-part tariff within the framework of a wholesale electricity market with nodal pricing. The expansion of the network is carried out through auctions of financial transmission rights for congested links. The mechanism is tested for a simplified transmission grid with ten interconnected zones, ten nodes, eleven lines and seventy eight generators in the Ontario province. The simulation is carried out for both peak and non-peak scenarios. Considering Laspeyres weights, the results show that prices converge to the marginal generation cost, the congestion rent decreases and the total social welfare increases.electricity transmission, financial transmission rights (FTR), incentive regulation, loop flows, nodal prices.