Challenges of economic modelling for transmission investment

Economic modelling of transmission investments is an integral part of the transmission investment approval process in New Zealand. It provides insight into how system reliability, operating costs and market dynamics will be affected by new assets. Economic analysis utilizes software tools that range in complexity from simple spreadsheets to highly detailed system dispatch models. As software modelling tools have become more sophisticated there is temptation for model developers to keep increasing model detail but the need for such detail must be weighed against the financial and system impacts of the problem being studied. The challenge facing modellers is to ensure an appropriate level of model detail is used that reflects the complexity and important variables of the investment being studied. This paper investigates some of the challenges associated with economic modelling of transmission investments and illustrates the importance of functionality and flexibility modelling tool design and development.