Embedding flexibility in transmission expansion planning: A real-options in projects approach

Achieving deep decarbonization requires significant investments in the power grids’ transmission networks. However, making optimal infrastructure investments is challenging for long-life-cycle projects in complex, changing, and highly uncertain environments. Sources of uncertainty include stochastic renewable energy resources’ penetration, forecasts of energy costs, and levels of load growth. To cope with uncertainty, this paper proposes a stochastic multi-period transmission expansion planning (TEP) using the real options in-projects (ROiP) approach for managing risks. This is realized by embedding systematic strategic flexibility in the transmission system design to capture better upside investment opportunities. The approach uses a decision-making framework to make scenario-dependent investments based on a lines’ capacity utilization index. Several representative case studies are conducted on three test systems of varying sizes with long-planning horizons to validate the performance of the ROiP model and compare the results with and without co-planning of battery energy storage. The numerical results demonstrate the added value of the proposed approach in augmenting the system flexibility through systematic actions to change the system design.