Evaluation of investments made by GENCOs in transmission network development

Abstract

Congestion and limited capacity in the transmission network can create market power for some market players and an inefficient competitive environment. It is necessary to soundly invest in network development to address the aforementioned issues. One group of major players in the electricity market are Generation Companies (GENCOs). In this paper, an economic investigation of transmission investment is carried out from the GENCO's perspective. The profits of power sales in the network after development and revenues from investment cost recovery mechanisms and financial incentives are examined. It is observed that the aforementioned revenues are adequate to encourage GENCOs for the investment. Moreover, this study explores the impacts of factors such as regulatory policies and economies of scale on the net profit and optimal investment design.