Optimization of transmission network for homogeneous good market

Abstract

We examine a model of a perfect competitive homogeneous good market with a network structure. Such a structure is typically important for energy resources: natural gas, oil and electricity. Local markets are connected by transmission lines with limited capacities and given cost functions for capacity increments. We consider the total welfare optimization problem and provide a method that determines optimal investments in the transmission system expansion for some types of the networks. In particular, we study the case where the market is divided into two submarkets with binding transmission line flow constraints between the submarkets. We obtain efficient algorithms for determination of the transmission systems optimal expansion. We conclude with the impact of the results and the outlook to future studies.

Keywords:

• Perfect competition
• transmission network
• expansion of network
• total welfare
• homogeneous good

AMS Subject Classifications:

• 90B10
• 91B15

Acknowledgements

We thank the participants of Analysis and Design of Markets for Homogeneous Goods session for useful discussion.

Notes

No potential conflict of interest was reported by the authors.

The results of this research were partially reported at EURO XXVII Conference in Glasgow (Vasin, Dolmatova, Kartunova, 2015).

Additional information

Funding

The research was supported by Russian Foundation for Basic Research [project number 14–01–91163 GFEN_a], National Natural Science Foundation of China [grant number 71003057], [grant number 71171120], [grant number 71373262]; Projects of International (Regional) Cooperation and Exchanges of NSFC [grant number 71311120090], [grant number 71311120091]; Natural Science Foundation of Shandong Province, China [grant number ZR2010GQ001]; Graduate Student Education Innovation Plan of Qingdao University [grant number QDY12017], [grant number QDY13004]; Specialized Research Fund for the Doctoral Program of Higher Education [grant number 20133706110002].