Deregulating Grid-Enhancing Technologies Through Financial Transmission Rights

Abstract

To accommodate the increasing share of renewable energy, the transmission network needs to be upgraded. Grid-enhancing technologies (GETs) are attractive alternatives that can replace or complement grid expansion. GETs enhance grid flexibility and increase the transfer capability over the current network. A main challenge facing proliferation of GETs is the lack of proper financial incentives for their adoption and efficient operation. This paper develops a novel Financial Transmission Right (FTR) allocation mechanism to incentivize GETs installation. The model allocates maximum feasible incremental FTRs in the directions requested by investors, while keeping existing FTRs feasible. Using the concept of proxy FTRs, the investors can only obtain incremental FTRs that their investment enables through enhancing the transfer capability. The paper shows that the proposed method is revenue adequate. Two major types of GETs are presented as representative investments that are compatible with the proposed model. These include series flexible ac transmission system (FACTS) devices, such as variable-impedance FACTS and devices based on voltage-sourced converters (VSC), as well as voltage phase controllers. The proposed model is first illustrated on a 3-bus system and then implemented on the IEEE 30-bus system to show its efficiency and scalability.