A bilevel programming approach to modeling of power transmission capacity planning

We propose a TransCo model for coordinating transmission expansion planning with competitive generation capacity planning in electricity markets. Our purpose is to provide a tool to simulate the equilibrium interplay regarding strategic decisions of a set of power producers and a single transmission operator. The solution represents an iterative process for defining the optimal transmission expansion program together with a correct guess of the power plants expansion program for each GenCo involved. The composition of new investments in power plants guessed by the TransCo must coincide with the optimal expansion plan defined by each GenCo. We illustrate the methodology by means of an example depicting a zonal electricity market with two zones.