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Life cycle management method for smart grid asset with real option theory

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4 Author(s)
Guowei Wu ; Zhejiang Electr. Power Corp., Hangzhou, China ; Hui Zhou ; Weiwei Pan ; Yunhe Hou

This paper addresses the life cycle management (LCM) problem for asset of smart grids. The costs of different stages during asset life cycle are integrated into a coherent framework. The real option theory is employed to quantify different strategies of LCM. The stochastic risks during the whole process of asset utilization are considered. The whole process of the asset investment, utilization and disposals are covered by the proposed real option based method. The analytical solutions of decision timing is derived and analyzed. The proposed model and method are used in the smart grid construction of Zhejiang Province Power Grid of China. Data from realistic power grids demonstrate and validate the proposed method.

Published in:

Innovative Smart Grid Technologies (ISGT Europe), 2012 3rd IEEE PES International Conference and Exhibition on

Date of Conference:

14-17 Oct. 2012