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Financial risk assessment for distribution system operators regulated by quality regulation
KTH, School of Electrical Engineering (EES), Electric Power Systems.
KTH, School of Electrical Engineering (EES), Electric Power Systems.ORCID iD: 0000-0002-8189-2420
2010 (English)In: Proceedings of Probabilistic Methods Applied to Power Systems (PMAPS), 2010Conference paper, Published paper (Refereed)
Abstract [en]

In the reregulated electricity market, performance-based regulations accompanied by quality regulations are gaining ground. The quality regulation results in new financial risks for the distribution system operators (DSOs) which calls for risk assessment methods that can simulate what costs a certain regulation implies for the DSO. When, for example, guaranteed standards for worst-served customers is combined with a reward and penalty scheme the methods must be able to predict both customer and system reliability. This paper presents a new risk assessment methodology based on time sequential Monte Carlo simulations that can handle both of these levels of reliability to simulate the total regulation cost due to an arbitrary quality regulation. Since most quality regulations are corrected ex-post for each year, variations in yearly reliability can cause large variations in the total regulation cost. Instead of only considering the average total regulation cost the developed methodology uses risk tools from the financial industry to also measure the costs of more extreme years. Doing so gives the DSOs a better understanding of the financial risks they are exposed to. The developed risk assessment methodology is used to evaluate different investment alternatives in a case study.

Place, publisher, year, edition, pages
2010.
National Category
Other Electrical Engineering, Electronic Engineering, Information Engineering
Identifiers
URN: urn:nbn:se:kth:diva-33811DOI: 10.1109/PMAPS.2010.5528969Scopus ID: 2-s2.0-77956449327ISBN: 978-1-4244-5720-5 (print)OAI: oai:DiVA.org:kth-33811DiVA: diva2:417905
Note
QC 20110530Available from: 2011-05-18 Created: 2011-05-18 Last updated: 2011-05-30Bibliographically approved
In thesis
1. Risk-based methods for reliability investments in electric power distribution systems
Open this publication in new window or tab >>Risk-based methods for reliability investments in electric power distribution systems
2011 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Society relies more and more on a continuous supply of electricity. However, while underinvestments in reliability lead to an unacceptable number of power interruptions, overinvestments result in too high costs for society. To give incentives for a socioeconomically optimal level of reliability, quality regulations have been adopted in many European countries. These quality regulations imply new financial risks for the distribution system operator (DSO) since poor reliability can reduce the allowed revenue for the DSO and compensation may have to be paid to affected customers.This thesis develops a method for evaluating the incentives for reliability investments implied by different quality regulation designs. The method can be used to investigate whether socioeconomically beneficial projects are also beneficial for a profit-maximizing DSO subject to a particular quality regulation design. To investigate which reinvestment projects are preferable for society and a DSO, risk-based methods are developed. With these methods, the probability of power interruptions and the consequences of these can be simulated. The consequences of interruptions for the DSO will to a large extent depend on the quality regulation. The consequences for the customers, and hence also society, will depend on factors such as the interruption duration and time of occurrence. The proposed risk-based methods consider extreme outage events in the risk assessments by incorporating the impact of severe weather, estimating the full probability distribution of the total reliability cost, and formulating a risk-averse strategy. Results from case studies performed show that quality regulation design has a significant impact on reinvestment project profitability for a DSO. In order to adequately capture the financial risk that the DSO is exposed to, detailed risk-based methods, such as the ones developed in this thesis, are needed. Furthermore, when making investment decisions, a risk-averse strategy may clarify the benefits or drawbacks of a project that are hard to discover by looking only at the expected net present value.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2011. xii, 97 p.
Series
Trita-EE, ISSN 1653-5146 ; 2011:040
Keyword
Distribution system reliability, risk management, quality regulation design, customer interruption costs, weather modeling, Monte Carlo simulations
National Category
Other Electrical Engineering, Electronic Engineering, Information Engineering
Identifiers
urn:nbn:se:kth:diva-33815 (URN)978-91-7501-003-8 (ISBN)
Public defence
2011-06-15, D3, Lindstedtsvägen 5, KTH, Stockholm, 14:00 (English)
Opponent
Supervisors
Note
QC 20110530Available from: 2011-05-30 Created: 2011-05-18 Last updated: 2011-05-30Bibliographically approved

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Söder, Lennart

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