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Real options on power system planning under uncertainties and efficiency constraints


Osthues, M and Rehtanz, C and Blanco, G and Negnevitsky, M, Real options on power system planning under uncertainties and efficiency constraints, Proceedings of the 18th Power Systems Computation Conference, 18-22 August, Wroclaw, Poland, pp. 279-285. ISBN 978-1-63439-401-7 (2014) [Refereed Conference Paper]

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DOI: doi:10.1109/PSCC.2014.7038324


Deregulation and large-scale renewable energy penetration have increased uncertainties in power system planning. Strategic flexibility in project planning and decision making is needed to mitigate increasing risks. This paper proposes a methodology that improves decision making by valuing the flexibility of investment strategies to cope with uncertainty. This is done by integrating maintenance and expansion planning. The flexibility of investment strategies, including reinvestment and expansion projects under uncertainties, is evaluated by a Real Option approach. The proposed methodology is tested on a 30-bus IEEE system. Monte Carlo simulations of uncertain state variables and the Least-Squares Monte Carlo approach are applied for evaluating investment options using dynamic backward programming. The analysis shows that flexible strategies gain in importance with increasing uncertainty and under efficiency constraints. In addition, the deferral of the final investment decision between alternative strategies remains a valuable option.

Item Details

Item Type:Refereed Conference Paper
Keywords:power system planning, uncertainty, real options, Monte Carlo simulation
Research Division:Engineering
Research Group:Electrical engineering
Research Field:Electrical energy generation (incl. renewables, excl. photovoltaics)
Objective Division:Energy
Objective Group:Energy storage, distribution and supply
Objective Field:Energy systems and analysis
UTAS Author:Negnevitsky, M (Professor Michael Negnevitsky)
ID Code:97631
Year Published:2014
Deposited By:Engineering
Deposited On:2015-01-05
Last Modified:2017-11-06

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