Market-based valuation of transmission network expansion. A heuristic application in GB

Abstract

Transmission investments are currently needed to meet an increasing electricity demand, to address security of supply concerns, and to reach carbon emissions targets. A key issue when assessing the benefits from an expanded grid concerns the valuation of the uncertain cash flows that result from the expansion. We develop a valuation model which combines optimization techniques, Monte Carlo simulation over the expansion project lifetime, and market data from futures contracts on commodities. The model allows for random failures in generation and transmission infrastructure. Uncertainty stems also from nodal loads, fuel prices, allowance prices, wind generation, and hydro generation. Thus the model accounts for the stochastic dynamics on both the demand side and the supply side. To demonstrate the model by example, we consider a simplified network with two nodes. It is intended to broadly resemble the power generation sectors in England/Wales and Scotland. We then focus on the proposed Western HVDC subsea link. We simulate the whole distribution of effects on system costs, carbon emissions, and unserved load.

A new approach of clustering operational states for power network expansion planning problems dealing with RES (renewable energy source) generation operational variability and uncertainty

“…Similarly, uncertainties related to load, renewable power generation, fuel and emission allowance prices are considered in Ref. [5]. And the solution approach used in Ref.…”

Analysis of Strategic Renewable Energy, Grid and Storage Capacity Investments via Stackelberg-Cournot Modelling

“…Reliability of the power system can also improve as the probabilities of unserved load or generation breakdown decrease with interconnections. Future uncertainties such as varying fuel or carbon prices, costs for transmission or installation of renewable capacity, demand growth and potential changes in markets and regulation [28] can add significant value to grid capacity projects [29], on top of strategic, environmental and social value [30].…”

“…Several network upgrade works considered optimisation including bilevel optimisation [16], [36], stochastic optimisation [13], [30], three-level optimisation with social welfare [26], [27] and a three-stage Nash game that aimed to model grid capacity expansion at a national level [55]. Other works focused on the expansion of the distribution grid and incorporated multi-objective optimisation [56], [57], multilevel optimisation [58] and Monte-Carlo simulations [59].…”