Integrated generation and transmission planning under uncertainty using flexibility in generation

The process of liberalization of power markets has changed the paradigm of planning the joint expansion of the generation and transmission segments. The assessment of this problem is even more complex when considering the uncertainties that usually determine the long-term evolution of the system. Moreover, and from the point of view of regulators and policy makers, an optimal assessment is of great interest because the lack of coordination between the two types of investment can jeopardize competition and efficiency in the whole electricity sector. In that context, this paper proposes an improved method to assess the joint expansion planning of the generation and transmission segments, considering the inherent flexibility of investments belonging the first segment, using the Real Options valuation approach, considering the Least Squares Monte Carlo method. A numerical example has been tested considering a system of two nodes. It is shown that the consideration of investments flexibility allows increasing the social benefit through the coordinated planning of the generation and transmission segments.