Game-theoretic Modeling of Curtailment Rules and their Effect on Transmission Line Investments

This paper provides a study of the impact of curtailment schemes, applied when generation exceeds demand, on the Capacity Factor (CF) of wind generators, including the effect of spatial wind correlation among different locations. Moreover, we discuss how a round-robin curtailment rule could be implemented to guarantee approximately equally curtailment ratio for generators of unequal rated capacity. Next, we consider a two-location problem, where excess renewable energy generation and demand are not co-located. We study the combined effect that curtailment schemes and line access rules have on the decision to invest in new transmission lines. In particular, we show that, for common access rules, this can lead to a Stackelberg game between transmission and local generation capacity investors, and we characterise the equilibrium of this game. Finally, we apply and exemplify our model to a concrete problem of building a transmission link in western Scotland, and we propose a mechanism for setting transmission charges that assures both that the transmission line gets built, but investors from the local community can also benefit from investing in renewable energy.