Network extension versus redispatch: An economic and electro-technical analysisDeriving an improved regulatory framework for the electricity system using a coherent simulation of the electrical transmission network and the electricity market which account

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Which power plants can be used to meet demand for electricity depends on the network capacity that is available. Congestion of networks inhibits using the producers with the lowest costs. For deriving an optimal electricity system, it is crucial to compare these "redispatch costs" to the cost of avoiding congestion by extending the network. Stochastic influences make this comparison of network costs and redispatch costs more complicated. Traditionally, unplanned outages of power plants or of network elements were the most prominent examples of such stochastic influences. These influences usually were accounted for by "worst case" scenarios. Networks were planned to operate still safely under the worst possible circumstances. The strong increase in the installation of renewable energy sources has strongly increased the amount of stochastic influences due to weather related uncertainty (wind speed, sunshine). A high regional concentration, in particular of wind power plants, increasingly causes stress situations in the network. To fully avoid these, massive network extensions would be necessary. Therefore, for evaluating network extension, it becomes increasingly inadequate to look at worst case scenarios; rather, a cost minimum allowing for temporary congestion should be identified.To achieve this, in the first part of the project any stochastic influences will be depicted using probability distribution functions. This allows to evaluate the frequency and intensity of redispatch measures, which can then be compared to network extension costs. The optimal solution derived in the first part of the project will usually not be the outcome of a pure market process. Market imperfections like externalities between network operators, or locational choices of power plants disregarding effects on the network will prevent this. This calls for a better understanding of how market design and market regulation affects the implementation of the first best solution. Hence, the second part of the project will analyze the current market institutions by asking: Do they provide the incentives for private actors to implement the first best solution? If not, how could they be improved?The close inter-disciplinary co-operation between electro-technical and economics researcher promises to deliver:1.Improvements in accounting for uncertainty in electricity networks.2.An integrated approach to networks and generation under uncertainty.3.An improved understanding of incentive compatible implementation in liberalized energy markets.