Flexibility and real options analysis in design for long-term generation expansion planning of power grids

Muhammad Rahmat*, Aakil Mohammad Caunhye, Michel-Alexandre Cardin

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract / Description of output

In recent years, the electricity industry has seen a drive towards the integration of renewable and environmentally friendly generation resources to power grids. These resources have highly variable availabilities. This work proposes a stochastic programming approach to optimize generation expansion planning (GEP) under generator supply capacity uncertainty. To better capture upside opportunities and reduce exposure to downside risks, flexibility is added to the GEP problem through real options on generator addition, which are to be exercised after uncertainty realizations. In addition, with the end goal of providing decision makers with easy-to-use guidelines, a conditional-go decision rule, akin to an if-then else statement in programming, is proposed whereby the decision maker is provided with a threshold of excess total generator capacity from the previous time period, below which a predetermined generator addition plan (the option) is exercised. The proposed methodology and its decision rule are implemented in a real-world study of Midwest U.S. Comparisons are made to quantify the value of flexibility and to showcase the usefulness of the proposed approach.
Original languageEnglish
Title of host publicationProceedings of the ASME International Design Engineering Technical Conferences and Computers and Information in Engineering Conference 2017
PublisherAmerican Society of Mechanical Engineers(ASME)
ChapterDETC2017-67494
Pages1-8
ISBN (Print)9780791858219
DOIs
Publication statusPublished - 1 Dec 2017
EventASME International Design Engineering Technical Conferences / Computers and Information in Engineering Conference (IDETC/CIE 2017) - Cleveland
Duration: 6 Aug 20179 Aug 2017

Publication series

NameProceedings of the ASME Design Engineering Technical Conferences
PublisherAMER SOC MECHANICAL ENGINEERS
ISSN (Print)2159-7383

Conference

ConferenceASME International Design Engineering Technical Conferences / Computers and Information in Engineering Conference (IDETC/CIE 2017)
CityCleveland
Period6/08/179/08/17

Keywords / Materials (for Non-textual outputs)

  • linear programming
  • transmission expansion
  • coordination
  • reliability
  • system

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