Market-Driven Transmission and Storage Co-Planning Expansion to Mitigate Market Power

The restructuring of electric power systems has introduced challenges regarding the mitigation of market power, where network congestion can be strategically exploited to increase energy prices. This paper proposes a proactive approach for the Market-Driven Transmission and Storage Expansion Co-Planning (MD-TSECP), specifically designed to neutralize potential market power exercise. The formulation is presented as a bilevel stochastic optimization model where the upper level minimizes the total annualized investment costs and consumer payments, subject to a stringent constraint on the Average Nodal Price Deviation Index (ANPDI). The lower level simulates hourly electricity market clearing under diverse wind generation and load demand scenarios. To address the inherent non-convexity and NP-hard nature of the bilevel structure, a hybrid solution methodology is developed, coupling a Genetic Algorithm (GA) for discrete investment decisions with Linear Programming (LP) for operational market clearing. Numerical case studies on the modified IEEE 24-bus system demonstrate that the integrated expansion of transmission lines and Energy Storage Systems (ESS) reduces the total annualized expansion cost by 7.5% compared to traditional planning, while maintaining the same market competitiveness target (Ih≤ 0.20). The results conclude that the co-optimization of ESS and transmission assets effectively acts as a nodal price stabilizer, ensuring competitive energy pricing and enhancing overall social welfare in deregulated environments.