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

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.
Authors:
 [1] ;  [2] ;  [3] ;  [4]
  1. Adolfo Ibanez Univ., Santiago (Chile)
  2. Vrije Univ. Amsterdam (Netherlands)
  3. Johns Hopkins Univ., Baltimore, MD (United States)
  4. Sandia National Lab. (SNL-NM), Albuquerque, NM (United States)
Publication Date:
Report Number(s):
SAND-2017-3855J
Journal ID: ISSN 0140-9883; 652433
Grant/Contract Number:
AC04-94AL85000
Type:
Accepted Manuscript
Journal Name:
Energy Economics
Additional Journal Information:
Journal Volume: 64; Journal ID: ISSN 0140-9883
Publisher:
Elsevier
Research Org:
Sandia National Lab. (SNL-NM), Albuquerque, NM (United States)
Sponsoring Org:
USDOE Office of Electricity Delivery and Energy Reliability (OE), Power Systems Engineering Research and Development (R&D) (OE-10)
Country of Publication:
United States
Language:
English
Subject:
60 APPLIED LIFE SCIENCES; Risk Aversion; Stochastic Programming; Transmission and Generation Planning; Investment
OSTI Identifier:
1356838
Alternate Identifier(s):
OSTI ID: 1419371

Munoz, Francisco, van der Weijde, Adriaan Hendrik, Hobbs, Benjamin F., and Watson, Jean-Paul. Does Risk Aversion Affect Transmission and Generation Planning? A Western North America Case Study. United States: N. p., Web. doi:10.1016/j.eneco.2017.03.025.
Munoz, Francisco, van der Weijde, Adriaan Hendrik, Hobbs, Benjamin F., & Watson, Jean-Paul. Does Risk Aversion Affect Transmission and Generation Planning? A Western North America Case Study. United States. doi:10.1016/j.eneco.2017.03.025.
Munoz, Francisco, van der Weijde, Adriaan Hendrik, Hobbs, Benjamin F., and Watson, Jean-Paul. 2017. "Does Risk Aversion Affect Transmission and Generation Planning? A Western North America Case Study". United States. doi:10.1016/j.eneco.2017.03.025. https://www.osti.gov/servlets/purl/1356838.
@article{osti_1356838,
title = {Does Risk Aversion Affect Transmission and Generation Planning? A Western North America Case Study},
author = {Munoz, Francisco and van der Weijde, Adriaan Hendrik and Hobbs, Benjamin F. and Watson, Jean-Paul},
abstractNote = {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.},
doi = {10.1016/j.eneco.2017.03.025},
journal = {Energy Economics},
number = ,
volume = 64,
place = {United States},
year = {2017},
month = {4}
}