Transmission Expansion Planning under Uncertainty: An Approach based on Real Option and Game Theory against Nature

Generally, transmission networks are not adapted to the new paradigms of the emerging power markets; therefore, transmission lines often operate under significant congestion levels. These issues are even more increased in power systems with high levels of demand growth, where usually even larger grid reinforcements are required. In addition, the technical and economic feasibilities of expansion alternatives are affected by the major uncertainties of the emerging economies. Consequently, this paper proposes a transmission system expansion approach focused on analysis and management of the risks which impact on the assessment of transmission investments. In this context, the valuations of transmission investments under random uncertainties are performed in terms of the social welfare, by designing risk management strategies based on real option concepts. Finally, non-random uncertainties are analyzed by criteria based on game theory against nature, in order to assess the robustness of a given expansion alternative under unforeseen scenarios. The approach is illustrated by a real application to the transmission system.