Tri-Level Expansion Planning for Transmission Networks and Distributed Energy Resources Considering Transmission Cost Allocation

A well-designed transmission cost allocation (TCA) scheme should reveal energy users' actual usage of transmission assets. By investing in distributed energy resources (DERs), a user should be allocated with a lower transmission price if devoted to reducing transmission capacity usage. To evaluate the impacts of TCA, a coplanning framework for centralized transmission networks and DERs is developed in this paper. Distinguished from the existing literature, we consider hourly transmission prices (TPs) that are updated by power flow tracing, together with locational marginal prices (LMPs) to incentivize users' investments for DERs. This problem is formulated as a tri-level model. On the first level, transmission expansion planning is optimized to satisfy transmission capacity requirements. On the second level, given the hourly LMPs and TPs, users at different buses strategically invest in DERs. On the third level, the market is cleared, and LMPs and TPs are updated. The lower two levels form a market equilibrium problem that can be solved by a diagonalization method. An iterative algorithm is proposed to solve the tri-level model, and convergence analysis is conducted. Case studies based on a modified Garver's 6-bus system and the IEEE 118-bus system demonstrate that a well-designed TCA scheme can incentivize users to invest in DERs, which effectively defers transmission expansion and reduces the system-wide investment costs.