Planning electricity transmission to accommodate renewables: Using two-stage programming to evaluate flexibility and the cost of disregarding uncertainty
AbstractWe develop a stochastic two-stage optimisation model that captures the multistage nature of electricity transmission planning under uncertainty and apply it to a stylised representation of the Great Britain (GB) network. In our model, a proactive transmission planner makes investment decisions in two time periods, each time followed by a market response. This model allows us to identify robust first-stage investments and estimate the value of information in transmission planning, the costs of ignoring uncertainty, and the value of flexibility. Our results show that ignoring risk has quantifiable economic consequences, and that considering uncertainty explicitly can yield decisions that have lower expected costs than traditional deterministic planning methods. Furthermore, the best plan under a risk-neutral criterion can differ from the best under risk-aversion.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1113.
Date of creation: 31 Jan 2011
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Decision making; electricity; transmission; planning; uncertainty;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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- Bert Willems & Joris Morbee, 2008.
"Risk management in electricity markets: hedging and market incompleteness,"
Center for Economic Studies - Discussion papers
ces0823, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
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- De Jonghe, C. & Hobbs, B. F. & Belmans, R., 2011. "Integrating short-term demand response into long-term investment planning," Cambridge Working Papers in Economics 1132, Faculty of Economics, University of Cambridge.
- van der Weijde, Adriaan Hendrik & Hobbs, Benjamin F., 2012. "The economics of planning electricity transmission to accommodate renewables: Using two-stage optimisation to evaluate flexibility and the cost of disregarding uncertainty," Energy Economics, Elsevier, vol. 34(6), pages 2089-2101.
- Marcelino Madrigal & Steven Stoft, 2012. "Transmission Expansion for Renewable Energy Scale-Up : Emerging Lessons and Recommendations," World Bank Publications, The World Bank, number 9375.
- Andreas Schröder & Maximilian Bracke, 2012. "Integrated Electricity Generation Expansion and Transmission Capacity Planning: An Application to the Central European Region," Discussion Papers of DIW Berlin 1250, DIW Berlin, German Institute for Economic Research.
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