Centralized vs. competitive transmission expansion planning: The need for new tools

Classic transmission expansion methodologies used in vertically integrated systems do not necessarily support competition. Centralized transmission expansion planning of old regimes needs be revised for its suitability in competitive electricity markets. This paper reviews centralized transmission expansion methodologies and its regulatory fundamentals. Using a classic centralized, cost minimization methodology, the paper shows the inconsistencies between centralized and competitive planning of electricity transmission. A proposal for transmission expansion planning is outlined; the proposal applies for electricity markets where a single entity is in charge of determining the transmission expansion plan and takes into account the competitive reactions of participants in the market.