A principal-agent approach to transmission expansion-Part II: Case studies. http://dx.doi.org/10.1109/TPWRS.2012.2201180

Abstract

This paper is the second of a two-paper series and presents a model to assess and promote investment projects defined in a plan of expansion of the transmission. We propose a model that consists of three main elements: valuation of a project based on the design of a linear contract, a principal-agent model to assess the optimal effort of an agent and the right-of-way negotiating cost. We also define a model to evaluate bids by the agents. The value of the project depends on the number of competitors, the incentives to invest, and the right-of-way costs. The right-of-way cost is approached from the perspective of a bilateral bargaining problem.We analyze two case studies. The first is a plan to expand the IEEE 24-RTS system. The second is based on the expansion plan of the Central Interconnected System (SIC) of Chile. The results show that the principal-agent model obtains the real costs of the bidders and creates incentives for disclosure of information. This creates optimal offers that depend on the incentive generated by the social planner.