Empirical Estimates of Transmission Value using Locational Marginal Prices

Publication Type

Report

Date Published

August 2022

Abstract

This study focuses on one potential benefit of transmission infrastructure—congestion relief. It explores historical grid conditions from 2012 through the first half of 2022, and evaluates the marginal value of transmission in facilitating trade within and across regional boundaries by calculating differences in observed nodal wholesale power prices. The study finds that wholesale power prices exhibit stark geographic differences that, in many cases, are stable over time. Many regional and interregional transmission links have significant potential economic value from reducing congestion and expanding opportunities for trade. In fact, many links have hourly average pricing differences in 2021 that exceeded $15/MWh—equivalent to $130 million per year for a 1000 MW link. The value of transmission is correlated with overall energy prices and varies by region and year. Critically, extreme conditions and high-value periods play an outsized role in the value of transmission, with 50% of transmission’s congestion value coming from only 5% of hours. Transmission planners run the risk of understating the benefits of regional and interregional transmission if extreme conditions and high-value periods are not adequately considered. These periods are natural features of actual market operations. As such, the study highlights the need for planners to more-comprehensively assess the value of transmission under both normal and extreme conditions.  

Year of Publication

2022

Notes

A brief summary of this study is available here

Please join Berkeley Lab’s Dev Millstein, along with Johannes (Hannes) Pfeifenberger, Principal at The Brattle Group, and Michael Goggin, Vice President at Grid Strategies, for a free webinar discussing the recent Berkeley Lab report “An Empirical Assessment of Regional and Interregional Transmission Congestion Value.” The webinar will be hosted by the Energy System Integration Group (ESIG). 
Information and registrationhttps://www.esig.energy/event/webinar-an-empirical-assessment-of-regional-and-interregional-transmission-congestion-value/ 
Date: August 25 @ 4:00 pm - 5:00 pm EDT

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