Does Risk Aversion Affect Transmission and Generation Planning? A Western North America Case Study

Munoz, Francisco; van der Weijde, Adriaan Hendrik; Hobbs, Benjamin F.; Watson, Jean-Paul

doi:10.1016/j.eneco.2017.03.025

Does Risk Aversion Affect Transmission and Generation Planning? A Western North America Case Study

Journal Article · Fri Apr 07 00:00:00 EDT 2017 · Energy Economics

DOI:https://doi.org/10.1016/j.eneco.2017.03.025· OSTI ID:1356838

Munoz, Francisco ^[1]; van der Weijde, Adriaan Hendrik ^[2]; Hobbs, Benjamin F. ^[3]; Watson, Jean-Paul ^[4]

Adolfo Ibanez Univ., Santiago (Chile)
Vrije Univ. Amsterdam (Netherlands)
Johns Hopkins Univ., Baltimore, MD (United States)
Sandia National Lab. (SNL-NM), Albuquerque, NM (United States)

Here, we investigate the effects of risk aversion on optimal transmission and generation expansion planning in a competitive and complete market. To do so, we formulate a stochastic model that minimizes a weighted average of expected transmission and generation costs and their conditional value at risk (CVaR). We also show that the solution of this optimization problem is equivalent to the solution of a perfectly competitive risk-averse Stackelberg equilibrium, in which a risk-averse transmission planner maximizes welfare after which risk-averse generators maximize profits. Furthermore, this model is then applied to a 240-bus representation of the Western Electricity Coordinating Council, in which we examine the impact of risk aversion on levels and spatial patterns of generation and transmission investment. Although the impact of risk aversion remains small at an aggregate level, state-level impacts on generation and transmission investment can be significant, which emphasizes the importance of explicit consideration of risk aversion in planning models.

View Accepted Manuscript (DOE)

Research Organization:: Sandia National Laboratories (SNL-NM), Albuquerque, NM (United States)

Sponsoring Organization:: USDOE; USDOE Office of Electricity Delivery and Energy Reliability (OE), Power Systems Engineering Research and Development (R&D) (OE-10)

Grant/Contract Number:: AC04-94AL85000

OSTI ID:: 1356838

Alternate ID(s):: OSTI ID: 1419371
OSTI ID: 22707253

Report Number(s):: SAND--2017-3855J; 652433

Journal Information:: Energy Economics, Journal Name: Energy Economics Vol. 64; ISSN 0140-9883

Publisher:: ElsevierCopyright Statement

Country of Publication:: United States

Language:: English

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