A Predictor-Corrector Approach for Market Power Mitigation in Transmission Expansion Planning Problems

The exercise of market power through network constraints in electricity markets can lead to high energy prices far from competitive prices. Traditional transmission expansion planning problem formulations do not consider strategic behavior of market agents. Therefore, they cannot capture the potential exercise of market power. In this paper, a predictor-corrector iterative algorithm is proposed to deal with market power mitigation in market-oriented transmission expansion planning problems. The predictor step consists on the solution of an equilibrium market model based on the conjectured supply function. The corrector step results from the solution of a conventional transmission expansion planning cast as a mixed integer linear programming problem, where the feasible region is dynamically updated taking into account the results from the predictor step. Several markets indicesare used to quantify the potential market power. The approach is illustrated using the six bus Garver and the IEEE-24 RTS test systems