NDLI: Optimal investment strategies for distributed generation in distribution networks with real option analysis

Content Provider	IET Digital Library
Author	Zou, Bo Wang, Jianhui Wen, Fushuan
Abstract	Efficient and well-timed investment in distributed generation (DG) in distribution networks in the electricity market environment presents a big challenge for distribution companies. In this study, a real option valuation framework is proposed to determine the optimal investment strategies for DG including the investment location, size, and timing. Within the proposed framework, the profit from investing in DG is modelled, where the benefits include the operation cost savings and capacity update deferral benefit compared with a no-DG-investment scenario over the study period. Future power demands and electricity prices are modelled as stochastic variables. The candidate DG investment plans are considered as multiple mutually exclusive options, and the corresponding managerial flexibility for seizing opportunities and mitigating risk of loss upon an unfavourable unfolding of future uncertainties is assessed with real option analysis using the extended least square Monte Carlo method. The distribution of future investment strategies and optimal initial investment threshold levels under various scenarios are analysed in a case study to demonstrate the characteristics of the proposed framework and methodology.
Starting Page	804
Ending Page	813
Page Count	10
ISSN	17518687
Volume Number	11
e-ISSN	17518695
Issue Number	Issue 3, Feb (2017)
Alternate Webpage(s)	https://digital-library.theiet.org/content/journals/iet-gtd/11/3
Alternate Webpage(s)	https://digital-library.theiet.org/content/journals/10.1049/iet-gtd.2016.0541
Journal	IET Generation, Transmission & Distribution
Publisher Date	2017-02-16
Access Restriction	Open
Rights Holder	© The Institution of Engineering and Technology
Subject Keyword	Capacity Update Deferral Benefit Cost Reduction DG Investment Plans Distributed Generation Distributed Power Generation Distribution Network Electricity Prices Interpolation And Function Approximation Investment Investment Location Investment Strategy Investment Threshold Level Least Square Monte Carlo Method Least Squares Approximation Monte Carlo Method Numerical Analysis Operation Cost Savings Power Demands Power Distribution Economics Power System Economics Power System Managemen Power System Operation Risk Mitigation Stochastic Variables
Content Type	Text
Resource Type	Article
Subject	Control and Systems Engineering Energy Engineering and Power Technology Electrical and Electronic Engineering

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