Planning a power system with large-scale wind power in an electricity market environment

This thesis proposes improvements to power system planning in order to take the effect of large-scale wind power into consideration in the planning process. With an improved planning process, it is possible to cost-efficiently maintain the reliability of a power system and functioning of the electricity markets. The existing Nordic transmission system planning and the Nordic electricity market design are the starting point for this thesis. The power system planning process and the planning methods are further developed based on the identified shortcomings of the existing planning practices. The shortcomings have been identified by evaluating the feasibility of current planning methods and by taking into account the new requirements that wind power sets for the power system planning. The improved planning methods, appearing in different planning steps, are combined with the existing planning process, making it better. Traditional grid planning is expanded to a power system planning by integrating the planning of reserve capacity to the planning process. The thesis proposes a probability-based method for defining the reserve power capacity for a power system with large-scale wind power. Also, the electricity market modelling and the profitability analysis of reserve and transmission capacity investments are improved. This results in more realistic socio-economic benefits for the investments. Furthermore, the utilisation of a real-option-based method for managing the uncertainties of investment profitability is proposed. Finally, a case study performed with the realistic grid and market data shows that the planning process is applicable in practice. It also shows that 4 GW of wind power capacity in Finland requires investments in reserve power and transmission capacity. The improved planning process optimises the transmission and reserve capacities in the power system, taking into account the electricity markets, uncertainty and socio-economic as well as transmission system operator aspects. This planning process is applicable in regions where electricity markets exist.