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Transmission planning under uncertainty: A two-stage stochastic modelling approach

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2 Author(s)
A. H. van der Weijde ; Electricity Policy Research Group, University of Cambridge, Department of Economics, Sidgwick Avenue, CB2 7EQ UK ; B. F. Hobbs

We develop a stochastic two-stage modelling approach to capture the multistage nature of the electricity transmission planning problem and apply it to a stylised representation of the Great Britain (GB) transmission network. In our model, a proactive transmission planner makes investment decisions in two time periods, each time followed by a market response. In the second period, there is less uncertainty than in the first, as the planner knows which of the scenarios has been realized, but the set of options open to the planner in the second period is constrained by the first-period decisions. This model allows us to estimate the value of information in transmission planning, the costs of ignoring uncertainty and the option value of transmission investment alternatives. Our results show that ignoring risk has quantifiable economic consequences and that there is a quantifiable value of optionality.

Published in:

2010 7th International Conference on the European Energy Market

Date of Conference:

23-25 June 2010