Transmission Network Planning under a price-based demand response program

Traditional transmission planning is primarily a trade off between congestions costs mainly driven by the supply side and transmission investments cost treating demand as fixed and unresponsive to market process either in the short or long term. In this paper a price-based demand response program is incorporated into the transmission planning problem. Using an iterative procedure, transmission network capacities are proposed and based on these capacities nodal prices are calculated. The nodal prices then trigger demand response leading to new demand levels. The process is repeated until convergence. As in practice the nodal prices as well as demand elasticity may change in the course of the year, therefore a multi-level load model associated with different elasticity is considered assuming the total energy consumption does not change beyond a pre-set amount although the demand level can alter in response to the price signal. In order to calculate the nodal price accurately, a transmission investment allocation method taking into account Use of System and Reliability Charges is also proposed. Since in practice transmission capacities come in standard discrete sizes the transmission planning process is formulated as a mixed-integer optimization problem. The proposed method is tested on modified IEEE 24 bus test system.