Portfolio Optimization in Transmission Investment in Deregulated Market

Transmission expansion planning (TEP) has faced a significant change since the deregulation of power systems. In the past decade, transmission investment has slowed down due to the increased conflicting objectives and uncertainties. In this paper, transmission investment is proposed to be open to public with merchant and regulated transmission investment pattern in either risk-free or risky investing environment. With the use of portfolio theory, risk in investing transmission expansion project is reduced. The proposed model makes merchant and regulated transmission investment be more attractive to both transmission company and public investors.

I. Introduction

SINCE deregulation has been introduced to many countries, competition between generation companies is initiated while transmission system remains monopoly. Traditionally, transmission expansion planning (TEP) is a least-cost planning. In deregulated market, TEP has to be changed so as to fulfill transmission companies' objectives, such as maximizing social welfare, minimizing electricity tariff and maximizing profit [1]. Generally speaking, TEP in deregulated market can be divided into two parts, transmission investment and transmission planning [2]. There are basically four transmission investment patterns: 1) public investment; 2) regulated private investment; 3) market-driven transmission investment; and 4) hybrid model of merchant and regulated transmission investment [2], [3].