What is the cost of disregarding market feedback in transmission expansion planning?

Under the current European market environment, transmission companies have to decide network expansion by maximizing social welfare. However, generation companies (GENCOs) decide their capacity expansion with the aim of maximizing their own profit. This process, in addition to the increasing penetration of renewable energy, storage and distributed generation, might represent a rupture between short and long-term signals. Therefore, this paper proposes a bi-level formulation for the generation and transmission coordination problem (GEPTEP). We consider a proactive framework in which a centralized TSO represents the upper level while the decentralized GENCOs, that trade in the market, represent the lower level. A case study is presented to evaluate different policy planning objectives. Additionally, the planning results of the bilevel framework (considering both perfect competition and Cournot oligopoly in the lower level) are compared with a traditional cost minimization framework.