Closing the loop between short-term operational volatilities and long-term investment risks in microgrids

In this article, we demonstrate that how closing the loop between operational dynamics and investment decisions for microgrids allows us to explicitly incorporate short-term operational volatility and long-term financing and market variations into investment decisions. Here, microgrid cost savings function describing the short-term benefit growth of the micro-grid under short-term (operational) uncertainties is fed into a stochastic long-term investment model. It turns out that cost saving function can be expressed as a regression function on a number of indices defined by design and operational characteristics of microgrids. Two regression models are constructed. Model (I) is a pure linear model and model II includes linear terms and an interaction term. Two sets of experiments (I and II) and results are demonstrated. Experiment (I) focuses on how volatility measures impact investment decisions. In experiment (II) the impact of operational interactions of generation assets in investment decisions is demonstrated.