Methodology for evaluating grid development strategies considering real option value and risk
Challenge and objective
Active measures gives the opportunity (real option) to postpone investment decision by waiting for new information about e.g. load growth. This is not captured in traditional net present value calculations. Moreover, active measures may come at the price of more operational problems, and this risk should be weighed against the option value of using active measures.
Methodology for planning of active distribution grids was extended by
1) a real options approach to account for the uncertainty in load scenarios and
2) a method for assessing the risk of undervoltage.
The methodology was tested for the CINELDI MV reference system considering flexibility from local energy communities as an active measure.
An illustration of a scenario-based methodology for elucidating risks and real option values of different grid development strategies.
Impact for distribution system innovation
The case study illustrates how some risk-taking is required to realize the value from using active measures to manage the long-term uncertainty in load scenarios.