Coordinated expansion planning based on a cost benefit analysis

Nowadays, the power production and transmission are substantial elements for the society, and will probably play a more important role in the future, but are also associated with various negative effects, which impose additional costs, the so called external costs. As long as these are not included in the electricity prices, market failures most often arise. In order to define expansion projects, right price signals are needed. Thus, the internalization of external costs in power production, which typically leads to higher marginal production costs for conventional power plants, can help in the identification of sustainable future transmission and production plans. The aggregated benefit of the internalization of external costs is usually higher than the social welfare deficit, depending on the energy mix, and can be further used in order to reinforce the existing electricity network, financing ldquogreenrdquo investments. The idea in this paper is the coordination of generation, transmission and policy planning, and their interaction, towards a common electricity market. The proposed methodology is based on a cost benefit analysis in order to support the final decision taken. Several scenarios, considering demand changes, power plants installations and investments in transmission are implemented by means of a European ldquocopperplaterdquo model.