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Risk-based method for distribution system reliability investment decisions under performance-based 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
2011 (English)In: IET Generation, Transmission & Distribution, ISSN 1751-8687, Vol. 5, no 10, 1062-1072 p.Article in journal (Refereed) Published
Abstract [en]

In the reregulated electricity market there is a growing interest in performance-based regulation accompanied by quality regulation for electric distribution networks. This paper develops a new risk-based method for reliability investment decisions when the distribution system operator (DSO) is exposed to financial risks defined by a quality regulation. As quality regulation design becomes more complex, more detailed risk management methods are needed in order to adequately capture the financial risk the DSO is exposed to. The proposed method applies a Monte Carlo simulation technique in order to assess the risks of the considered reinvestment projects. By using the proposed method the impacts that different risk strategies (risk-neutral/risk-averse) and risk models (non-time-varying/time-varying) have on which reinvestment project is selected is investigated in a case study. This is investigated for two different quality regulation designs. The result show that primarily the quality regulation design but also the risk model formulation and risk strategy have a major impact on which reinvestment project is selected.

Place, publisher, year, edition, pages
2011. Vol. 5, no 10, 1062-1072 p.
Keyword [en]
risk based method, distribution system reliability, investment decisions, performance based regulation, re-regulated electricity market, quality regulation, electric distribution networks, distribution system operator, financial risks, risk management method, DSO, Monte Carlo simulation
National Category
Other Electrical Engineering, Electronic Engineering, Information Engineering
Identifiers
URN: urn:nbn:se:kth:diva-33813DOI: 10.1049/iet-gtd.2011.0047ISI: 000295534100009Scopus ID: 2-s2.0-80053515792OAI: oai:DiVA.org:kth-33813DiVA: diva2:417907
Available from: 2011-05-18 Created: 2011-05-18 Last updated: 2012-01-03Bibliographically 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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