Investment

Abstract

Forthcoming adoption of variable renewable energy sources (VRES) in an effort to decarbonize the power sector will necessitate complementary reinforcement of the transmission network. Indeed, VRES such as solar and wind are typically remotely located from demand centers, and achieving climate objectives will be challenging without expansion of the grid to integrate VRES. In this context, investment in transmission lines and generation capacities will have to be adapted to not only system conditions but also market structures. The former includes aspects such as VRES output, whereas the latter is concerned with imperfect competition among producers. In a similar vein, a strategic producer’s generation-expansion problem will be studied to demonstrate how prices may be manipulated and lead to loss in social welfare.