EconPapers    
Economics at your fingertips  
 

Does risk aversion affect transmission and generation planning? A Western North America case study

Francisco D. Munoz, Adriaan van der Weijde, Benjamin F. Hobbs and Jean-Paul Watson

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: 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 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. 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.

Keywords: risk aversion; stochastic programming; transmission planning; generation planning (search for similar items in EconPapers)
JEL-codes: C61 D80 L94 Q40 (search for similar items in EconPapers)
Date: 2016-08-24
New Economics Papers: this item is included in nep-ene and nep-upt
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1647.pdf

Related works:
Journal Article: Does risk aversion affect transmission and generation planning? A Western North America case study (2017) Downloads
Working Paper: Does risk aversion affect transmission and generation planning? A Western North America case study (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1647

Access Statistics for this paper

More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer (jd419@cam.ac.uk).

 
Page updated 2025-02-14
Handle: RePEc:cam:camdae:1647