Optimal transmission switching: economic efficiency and market implications

Traditionally, transmission assets for bulk power flow in the electric grid have been modeled as fixed assets in the short run, except during times of forced outages or maintenance. This traditional view does not permit reconfiguration of the transmission grid by the system operators to improve system performance and economic efficiency. The current push to create a smarter grid has brought to the forefront the possibility of co-optimizing generation along with the network topology by incorporating the control of transmission assets within the economic dispatch formulations. Unfortunately, even though such co-optimization improves the social welfare, it may be incompatible with prevailing market design practices since it can create winners and losers among market participants and it has unpredictable distributional consequences in the energy market and in the financial transmission rights (FTR) market. In this paper, we first provide an overview of recent research on optimal transmission switching, which demonstrates the substantial economic benefit that is possible even while satisfying standard N−1 reliability requirements. We then discuss various market implications resulting from co-optimizing the network topology with K. W. Hedman (B) School of Electrical, Computer, and Energy Engineering, Arizona State University, 579 Engineering Research Center, Tempe, AZ 85287, USA e-mail: [email protected] S. S. Oren Industrial Engineering and Operations Research Department, University of California at Berkeley, 4135 Etcheverry Hall, Berkeley, CA 94720, USA e-mail: [email protected] R. P. O’Neill Office of Energy Policy and Innovation, Federal Energy Regulatory Commission, 888 1st St. NE., Washington, DC 20426, USA e-mail: [email protected]