Determining the value of controllable devices in a liberalized electricity market: a new approach

This paper describes a method of assessing the value of controllable devices such as flexible AC transmission systems (FACTS) in a liberalized electricity market. A sophisticated algorithm using AC optimal power flow (OPF) is often unnecessarily detailed for the purpose of valuating such projects. Input parameters such as expected future generation mix is hard to guess and error prone. Therefore a simplified model of the underlying electricity system was chosen for this evaluation. The suggested method is based on a model that uses area-constraints and aggregated generation in each area coupled with a double auction market model, based on the production costs of generators. A discounted cash flow methodology is then used to estimate the value of this project. In different case studies the influence of various parameters on the value of the controllable device is determined. Typical parameters are: investment costs, running costs, relocatability etc. Also the impact of transmission congestions on electricity prices, consumer, producer and society profit is studied.