Market-based generation and transmission expansions in the competitive market

In competitive energy market system, expansions are based on market-based resources. This concept is commonly accepted for the generation business, while it is more difficult to be put into practice for the transmission business as transmission is considered a natural monopoly. Nevertheless, as in the liberalized energy markets, the fast growth of wholesale electricity trading is strongly increasing the request for transmission services. A market-based model for transmission expansion has been recently proposed in order to provide incentives to the realisation of new transmission assets. The paper deals with some factors affecting both generation and transmission market-based expansions: price-forecasting, inter-area congestions, grid phenomena, transmission capacity increase, transmission technologies and system planning design. Methodologies and tools developed at CESl for the assessment of market-based projects are described as well as some applications and results relevant to the Italian system.