Comillas Pontifical University. Madrid (Spain)
December 19th, 2025
Summary:
After more than two decades of experience with the deregulated functioning of electricity markets, several challenges have emerged for the development of power systems, among others, the need to coordinate generation and transmission investment decisions, moreover considering the high penetration of renewable generation expected in the upcoming years, which creates an additional problem associated with the risks for investors in both activities. Therefore, this thesis analyses the impact of FTRs on the expansion of the system and their use as a potential tool to coordinate generation and transmission expansion planning in a liberalized electricity environment and to hedge the market price risk caused by network congestion faced by generation investors in remote areas.
This document includes a review and classification of the most relevant works in this field to identify a research gap in the analysis of the combined use of planning approaches and appropriate complementary regulatory coordination schemes, including their use to manage the most relevant risks that investors in both activities are subject to and the lack of implementation of risk modeling strategies to assess the effects of the risk aversion of stakeholders properly. Given the research objective defined, this thesis work focuses on assessing the impact on the efficiency of the system’s expansion of the implementation of Long-Term Financial Transmission Rights as a tool to hedge the market price risk caused by network congestion faced by generation investors in remote areas.Together with this, the relevance of implementing FTRs as a coordination tool is assessed, assuming that generation investors in remote areas are strategic and risk-averse.
Based on the computed results, it is possible to conclude that the availability of FTRs to manage the price risk perceived by risk-averse generation companies in remote areas should trigger a relevant increase in the system’s social welfare and could also lead to relevant changes in the generation and transmission socially optimal investment decisions, involving additional generation investments in remote areas, particularly in the North Sea within the European system. In addition, FTRs are shown to contribute to partially solving the coordination problem by providing significant welfare-enhancing coordination incentives to investors.
Spanish layman's summary:
Este trabajo de tesis evalúa el impacto en la eficiencia de la implementación de los LT-FTRs en la expansión de la generación y transporte como herramienta para cubrir el riesgo de precio de mercado causado por las congestiones de la red que enfrentan los inversores de generación en zonas remotas. Así mismo, se evalúa la relevancia de implementar los FTRs como herramienta de coordinación, asumiendo que los inversores de generación en zonas remotas son estratégicos y adversos al riesgo.
English layman's summary:
This thesis work focuses on assessing the impact on the efficiency of the generation and transmission expansion through the implementation of LT-FTRs as a tool to hedge the market price risk caused by network congestion faced by generation investors in remote areas. Together with this, the relevance of implementing FTRs as a coordination tool is assessed, assuming that generation investors in remote areas are strategic and risk-averse.
Descriptors: Power technology, Operations research, Energy
Keywords: FTRs, generation expansion planning, transmission expansion planning, coordination mechanism, regulatory mechanisms, risk management, risk modelling, MPEC, MPCC.
Citation:
S. Gómez, "Analysis of the Impact of FTRs on the Generation and Transmission Expansion Planning and Its Coordination", PhD. dissertation, Comillas Pontifical University, Madrid, Spain, 2025.
