Using Coalition Formation and Game Theory for Allocating Capital to New Transmission Investment

The following presents issues and techniques for new innovation in addressing the problem of allocating cost in the competitive deregulated power markets. Due to deregulation, higher competition in the generation sector of the energy market has occurred. The same has not been true for investment in transmission. The socialization methods of the past have been shown to be unfair to some market and network participants. The decentralization of cost allocation must be considered. In order to help consumers receive cheaper electricity prices while also increasing the reliability of the power grid, a new cost allocation method is needed. To achieve the two goals, new transmission investment (new/upgraded transmission line) must be made to prevent market power and remove congestion cost in order to reduce the locational marginal price of electricity. The following will provide a comparison between traditional cost allocation methods and a new cost allocation method based on agent-based game theory. The performance of the model will be tested on a multi-bus system.