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

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  • Chamorro, José M.
  • Abadie, Luis M.
  • de Neufville, Richard
  • Ilić, Marija

Abstract

Transmission investments are currently needed to meet an increasing electricity demand while enhancing security of supply, promoting competition, and integrating renewable energy. 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. Our multivariate stochastic model accounts for uncertain dynamics on both the demand side and the supply side. It can assist decision makers when confronted with challenging strategic portfolio choices regarding generation and transmission infrastructures. Though our ultimate goal is to develop a generalizable model, to demonstrate the model by example we consider a simplified network with two nodes. We then focus on the proposed Western HVDC subsea link between England/Wales and Scotland, and simulate the whole distribution of effects on major system variables over its useful life.

Suggested Citation

  • Chamorro, José M. & Abadie, Luis M. & de Neufville, Richard & Ilić, Marija, 2012. "Market-based valuation of transmission network expansion. A heuristic application in GB," Energy, Elsevier, vol. 44(1), pages 302-320.
    • Handle: RePEc:eee:energy:v:44:y:2012:i:1:p:302-320
    DOI: 10.1016/j.energy.2012.06.028
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    Cited by:

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    3. Shivaie, Mojtaba & Ameli, Mohammad T., 2016. "Strategic multiyear transmission expansion planning under severe uncertainties by a combination of melody search algorithm and Powell heuristic method," Energy, Elsevier, vol. 115(P1), pages 338-352.
    4. Fitiwi, Desta Z. & de Cuadra, F. & Olmos, L. & Rivier, M., 2015. "A new approach of clustering operational states for power network expansion planning problems dealing with RES (renewable energy source) generation operational variability and uncertainty," Energy, Elsevier, vol. 90(P2), pages 1360-1376.
    5. Fitiwi, Desta Z. & Olmos, L. & Rivier, M. & de Cuadra, F. & Pérez-Arriaga, I.J., 2016. "Finding a representative network losses model for large-scale transmission expansion planning with renewable energy sources," Energy, Elsevier, vol. 101(C), pages 343-358.
    6. Wang, Jianxiao & Zhong, Haiwang & Xia, Qing & Kang, Chongqing, 2017. "Optimal transmission conversion from alternating current to high voltage direct current transmission systems for limiting short circuit currents," Energy, Elsevier, vol. 118(C), pages 545-555.

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