Decision Analysis of Merchant Transmission Investment by Perpetual Options Theory

Probabilistic multi-objective transmission investment and expansion planning

“…A well-organized transmission expansion planning (TEP) scheme plays a major role in electricity markets around the world [1]. The competition between power market participants forms backbone of the electrical energy industry in deregulated power systems [2]. Some parts of power systems, however, still remain monopoly, and diverging incentive policy approaches have complicated the development of a functional market.…”

“…In other words, private investors are unable to justify investment in new transmission line projects and find them economically viable and expendable. Lack of economic incentives for investing in new transmission lines is a drawback in countries such as United States of America which should invest as their generations and loads grow up [2]. The root of this drawback is associated with transmission services pricing and tariffs, and also power system uncertainties make it more severe.…”

“…The RTO usually installs some new transmission lines to maintain the reliability of the power system within a desirable level. The uncertainty of these projects is very low [2]. The economical projects are those which can be done by private investors if enough economical incentives exist.…”

“…If these projects are economically profitable, then the private investors may become motivated to invest. The costs of these projects could be recovered by the transmission line users who make benefit from cheaper energy when the transmission lines are installed [2]. Some unavoidable uncertainties including the electricity price volatility and the behavior of energy users threaten the profitability of these projects.…”

When the wind blows over Europe a simulation analysis and the impact of grid extensions

“…They do not recommend applying mustoffer provisions. Other authors look at the risk associated with a MTI decision under uncertainty (Salazar et al, 2007;Saphores et al, 2004). Among the CTP approaches, Vogelsang (2001) analyzes transmission cost and demand functions assuming rather general properties, and adopts established regulatory adjustment processes based on a two-part tariff cap for transmission.…”