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Perez, A. P., Sauma, E. E., Munoz, F. D., & Hobbs, B. F. (2016). The Economic Effects of Interregional Trading of Renewable Energy Certificates in the US WECC. Energy J., 37(4), 267–295.
Abstract: In the U.S., individual states enact Renewable Portfolio Standards (RPSs) for renewable electricity production with little coordination. Each state imposes restrictions on the amounts and locations of qualifying renewable generation. Using a co-optimization (transmission and generation) planning model, we quantify the long run economic benefits of allowing flexibility in the trading of Renewable Energy Credits (RECs) among the U.S. states belonging to the Western Electricity Coordinating Council (WECC). We characterize flexibility in terms of the amount and geographic eligibility of out-of-state RECs that can be used to meet a state's RPS goal. Although more trade would be expected to have economic benefits, neither the size of these benefits nor the effects of such trading on infrastructure investments, CO2 emissions and energy prices have been previously quantified. We find that up to 90% of the economic benefits are captured if approximately 25% of unbundled RECs are allowed to be acquired from out of state. Furthermore, increasing REC trading flexibility does not necessarily result in either higher transmission investment costs or a substantial impact on CO2 emissions. Finally, increasing REC trading flexibility decreases energy prices in some states and increases them elsewhere, while the WECC-wide average energy price decreases.
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Ozdemir, O., Munoz, F. D., Ho, J. L., & Hobbs, B. F. (2016). Economic Analysis of Transmission Expansion Planning With Price-Responsive Demand and Quadratic Losses by Successive LP. IEEE Trans. Power Syst., 31(2), 1096–1107.
Abstract: The growth of demand response programs and renewable generation is changing the economics of transmission. Planners and regulators require tools to address the implications of possible technology, policy, and economic developments for the optimal configuration of transmission grids. We propose a model for economic evaluation and optimization of inter-regional transmission expansion, as well as the optimal response of generators' investments to locational incentives, that accounts for Kirchhoff's laws and three important nonlinearities. The first is consumer response to energy prices, modeled using elastic demand functions. The second is resistance losses. The third is the product of line susceptance and flows in the linearized DC load flow model. We develop a practical method combining Successive Linear Programming with Gauss-Seidel iteration to co-optimize AC and DC transmission and generation capacities in a linearized DC network while considering hundreds of hourly realizations of renewable supply and load. We test our approach for a European electricity market model including 33 countries. The examples indicate that demand response can be a valuable resource that can significantly affect the economics, location, and amounts of transmission and generation investments. Further, representing losses and Kirchhoff's laws is also important in transmission policy analyses.
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