An Economic Incentive Mechanism for Resilient Hardening and Expansion Based on the Nash Bargaining Theory

The hardening and expansion of power lines are two main measures for enhancing the power system resilience. This article proposes an economic incentive mechanism for the resilient hardening and expansion (RHaE) based on the Nash bargaining theory by setting up a cooperative game for the transmission company (Transco) and load serving entities (LSEs). Within this framework, the Transco and LSEs negotiate to determine the RHaE strategy, with introducing the RHaE payoff and payment to coordinate their incremental economic utilities resulting from the RHaE. The cooperative game model maximizes the product of the incremental economic utilities of Transco and LSEs, considering the RHaE impacts on both the load recovery results during extreme events and the energy market clearing results during normal conditions. The proposed model is then solved based on the nested column-and-constraint generation (C&CG) algorithm. The effectiveness of the proposed economic incentive mechanism is verified with case studies. Results demonstrate that the proposed economic incentive mechanism for RHaE could achieve the same resilience enhancement effect with the same investment cost as the budget-incentivized method in existing studies. Moreover, it provides clear economic incentives for Transco and LSEs to actively cooperate for RHaE, as well as guaranteeing a fair cost allocation for RHaE and promoting the social optimum.