1 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans° The role of transmission investment in coordination between generation and transmission in the liberalized power systems Vincent Rious*, Jean-Michel Glachant #, Yannick Perez #, Philippe Dessante* * Energy Department – Supélec # ADIS – University Paris 11 + Loyola de Palacio Chair – EUI 23 rd June 2009

2 Coordinated gen° and trans° investments by an integrated utility Generation Investment Cost W Generation Investment Cost E < Integrated Utility  Easy to know the cheapest investment strategy Conclusions Results Analysis framework Questions Operationnalization Starting Point 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

3 Generation Investment Cost W Generation Investment Cost E Unbundling and coordination need < Locational Signals Liberalized power system  Sent by the TSO While managing congestion Best? Conclusions Results Analysis framework Questions Operationnalization Starting Point  Efficient coordination? 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

4 Starting point But in reality, two unexplained paradoxes –PJM before 2007 Good locational signals but congestion cost  –National Grid (NG) Few locational signals but congestion cost  Conclusions Results Analysis framework Questions Operationnalization Starting Point 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

5 Question Question #1 –How to explain the choice of locational signals used by the TSOs? Question #2 –What is THE crucial mechanism for coordination between generation and transmission for electricity? How to explain the coordination implemented by the TSOs and the performance of this coordination ? Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

6 Analysis framework An analysis framework that combines –Modularity [Baldwin-Clark, 2000] Seperate the different independent tasks and their variants Proposition of an ideal TSO as a benchmark for comparisons –New Institutionnal Economics [Williamson, 1991] Effect of the arrangement to manage assets on the performances Structure of governance of the network Institutionnal complementarity [Aoki, 2001] between the structure of governance of the network and the management of power flows Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

7 Operationnalization of the modular analysis of the management of power flows Short run locational signals Transmission investment Starting point Conclusions Results Analysis framework Questions Operationnalizatio n 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

8 Operationnalization of the modular analysis of the management of power flows -- Redispatching ++ Nodal pricing Short run locational signals Transmissio n investment Starting point Conclusions Results Analysis framework Questions Operationnalizatio n 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

9 Proposition of an ideal TSO ++ Nodal pricing Short run locational signals Transmissio n investment ++ Minimization of the total cost of the network Starting point Conclusions Results Analysis framework Questions Operationnalizatio n 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

10 Comparison: Ideal TSO / Real TSOs Ideal TSO Short run signals ++ Transmission investment ++ Starting point Conclusions Results Analysis framework Questions Operationnalizatio n 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

11 Comparison: Ideal TSO / Real TSOs Ideal TSOPJM before 2007 Short run signals ++ Transmission investment +++- Starting point Conclusions Results Analysis framework Questions Operationnalizatio n 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

12 Comparison: Ideal TSO / Real TSOs Ideal TSOPJM before 2007National Grid Short run signals Transmission investment Starting point Conclusions Results Analysis framework Questions Operationnalizatio n 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

13 Comparison: Ideal TSO / Real TSOs Ideal TSOPJM before 2007National Grid Short run signals Transmission investment Observed evolution of congestion cost  Starting point Conclusions Results Analysis framework Questions Operationnalizatio n 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

14 Operationnalization of the structure of governance of the network The determinants of the structure of governance of the network –TSO owner of the network or not –Incentivized or self-regulated TSO Institutionnal complementarity with the modules of management of power flows –Explaination  of the paradoxes  of the difference between the real TSOs and the ideal TSO –Highlighting THE central mechanism of coordination Starting point Conclusions Results Analysis framework Questions Operationnalizatio n 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

15 Question #1 : How to explain the choice of locational signals used by the TSOs? Short run signals Transmission investment Starting point Conclusions Results Analysis framework Questions Operationnalization Structure of governance of the network Transmission Ownership Regulation Transmission ownership 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

16 Question #1 : How to explain the choice of locational signals used by the TSOs? Short run signals Transmission investment Structure of governance of the network Transmission Ownership Regulation Short run signals Transmission investment Structure of governance of the network Transmission Ownership Regulation Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

17 Question #1 : How to explain the choice of locational signals used by the TSOs? PJM Short run signals ++ Transmission investment +- Structure of governance of the network Transmission Ownership Regulation Light TSO Self- regulated Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

18 Question #1 : How to explain the choice of locational signals used by the TSOs? PJM Short run signals ++ Transmission investment +- Structure of governance of the network Transmission Ownership Light TSO Regulation Self- regulated Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

19 Question #1 : How to explain the choice of locational signals used by the TSOs? PJMNational Grid Short run signals ++-- Transmission investment +-++ Structure of governance of the network Transmission Ownership Light TSO Regulation Self- regulated Heavy TSO Incentive Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

20 Question #2 : What is THE crucial mechanism for coordination? Structure of governance of the network Dealing with congestion Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

21 Question #2 : What is THE crucial mechanism for coordination? PJM Structure of governance of the network Dealing with congestion Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

22 Question #2 : What is THE crucial mechanism for coordination? PJMNational Grid Structure of governance of the network Dealing with congestion Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

23 Question #2 : What is THE crucial mechanism for coordination? PJMNational Grid Structure of governance of the network Light TSO Dealing with congestion Internalization of congestion Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

24 Question #2 : What is THE crucial mechanism for coordination? PJMNational Grid Structure of governance of the network Light TSOHeavy TSO Dealing with congestion Internalization of congestion Development of the network Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

25 Locational signals are necessary But generators have a lots of locational constraints  lasting congestions  need to develop the grid Question #2 : What is THE crucial mechanism for coordination? PJMNational Grid Structure of governance of the network Light TSOHeavy TSO Dealing with congestion Internalization of congestion Development of the network Observed evolution of congestion cost  Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

26 Conclusions Structure of governance of the network –Few or no coordination signals –Coordination signals ≠ dealing with the cause of congestion –Network investment  the unique coordination mechanism really effective Starting point Conclusions Results Analysis framework Questions Operationnalization 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°

27 The role of transmission investment in coordination between generation and transmission in the liberalized power systems Vincent Rious*, Jean-Michel Glachant #, Yannick Perez #, Philippe Dessante* * Energy Department– Supélec # ADIS – University Paris 11 Thank you for your attention Questions ? Comments ? 32nd International Conference of IAEE – San Francisco – V. Rious et al. - Transmission investment & coordination btwn gen° & trans°