The Hybrid Transmission Grid Architecture: Benefits in Nodal Pricing

Recently, we proposed a capacity expansion approach for transmission grids that combines the upgrade of transmission capacity with a transition in system structure to improve grid operation. The key to this concept is a particular hybrid AC/DC transmission grid architecture, which is obtained by uprating selected AC lines via a conversion to HVDC. We have shown that this system structure improves optimal power flow (OPF) solvability and that it can reduce the total generation costs. In this paper, we study the benefits of this hybrid architecture in the context of a deregulated electricity market. We propose an efficient and accurate nodal pricing method based on locational marginal prices (LMPs) that utilizes a second-order cone relaxation of the OPF problem. Applicability of this method requires exactness of the relaxation, which is difficult to obtain for conventional meshed AC transmission grids. We prove that the hybrid architecture ensures applicability if the LMPs do not coincide with certain pathological price profiles, which are shown to be unlikely under normal operating conditions. Using this nodal pricing method, we demonstrate that upgrading to the hybrid architecture can not only increase the effective transmission capacity, but also reduce the separation of nodal markets and improve the utilization of generation.