Investment and Risk Management in Electrical Infrastructure

This project explores the problems faced by an independent system operator, when investing in new electrical infrastructure. The expansion of power generation and transmission capacities must be made to ensure the power system remains resilient under uncertain demand and economic conditions. Recently, higher emphasis has been placed on the environmental impact of new power plants, as energy companies are under increased political pressures. A multi-stage stochastic programming model is proposed that allows for investment in new wind and solar farms, and is suitable under an emissions trading scheme. In order to obtain a computationally tractable problem a linear decision rule approximation is applied to both the primal and dual problems which results in the solution of a tractable linear program. A case study of the electricity system in El Salvador is undertaken to assess possible investment opportunities and to evaluate the model. The results highlight a mix of renewable resources as the best option to facilitate rising demand for electricity, likely increases in fossil-fuel prices and the need for emission-free energy.