Energies 2011, 4(10), 1696-1727; doi:10.3390/en4101696
Article

Valuing Expansions of the Electricity Transmission Network under Uncertainty: The Binodal Case

1email and 2,* email
Received: 1 August 2011; in revised form: 27 September 2011 / Accepted: 12 October 2011 / Published: 21 October 2011
(This article belongs to the Special Issue Technologies to Achieve Greenhouse Gas Mitigation)
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Abstract: Transmission investments are currently needed to meet an increasing electricity demand, to address security of supply concerns, and to reach carbon-emissions targets. 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 propose a valuation model that accommodates both physical and economic uncertainties following the Real Options approach. It combines optimization techniques with Monte Carlo simulation. We illustrate the use of our model in a simplified, two-node grid and assess the decision whether to invest or not in a particular upgrade. The generation mix includes coal- and natural gas-fired stations that operate under carbon constraints. The underlying parameters are estimated from observed market data.
Keywords: electricity; transmission network; congestion; expansion; load; fuel prices; generation costs; emission allowances; EU Emissions Trading Scheme (ETS); GHG abatement
PDF Full-text Download PDF Full-Text [633 KB, uploaded 24 October 2011 17:06 CEST]

Export to BibTeX |
EndNote


MDPI and ACS Style

Abadie, L.M.; Chamorro, J.M. Valuing Expansions of the Electricity Transmission Network under Uncertainty: The Binodal Case. Energies 2011, 4, 1696-1727.

AMA Style

Abadie LM, Chamorro JM. Valuing Expansions of the Electricity Transmission Network under Uncertainty: The Binodal Case. Energies. 2011; 4(10):1696-1727.

Chicago/Turabian Style

Abadie, Luis M.; Chamorro, José M. 2011. "Valuing Expansions of the Electricity Transmission Network under Uncertainty: The Binodal Case." Energies 4, no. 10: 1696-1727.

Energies EISSN 1996-1073 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert