Restructuring and deregulation has exposed transmission planner to new objectives and uncertainties. Therefore, new criteria and approaches are needed for transmission planning in deregulated environments. A new market-based approach for transmission planning in deregulated environments is presented in this paper. The main contribution of this research is: i) introducing a new probabilistic tool, named probabilistic locational marginal prices, for computing the probability density functions of nodal prices; ii) defining new market-based criteria for transmission expansion planning in deregulated environments; and iii) presenting a new approach for transmission expansion planning in deregulated environments using the above tool and criteria. The advantages of this approach are: i) it encourages and facilitates competition among all participants; ii) it provides nondiscriminatory access to cheap generation for all consumers; iii) it considers all random and nonrandom power system uncertainties and selects the final plan after risk assessment of all solutions; and iv) it is value based and considers investment cost, operation cost, congestion cost, load curtailment cost, and cost caused by system unreliability. The presented approach is applied to IEEE 30–bus test system.

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