Abstract

This paper analyzes the effects of relieving power transmission congestion to encourage the development of renewable energy (RE) under different regulatory policies. The present model is based on Cournot competition and incorporates uncertainty and the variability of both renewable resources and demand. Transmission congestion particularly affects the development of RE under subsidy policies (feed-in tariff and premium payment). By investing in flexible AC transmission system (FACTS) and/or other devices that increase transmission capacity, all policies have positive incentives from the social perspective. From a private perspective, the tax policy does not provide sufficient incentives. Higher levels of transmission investment are obtained from a social perspective than from a private perspective. Finally, the existence of multiple equilibria affects the resulting social welfare and market outcomes. In particular, CO2 emissions and social welfare may significantly vary from equilibrium to equilibrium. (C) 2016 American Society of Civil Engineers.