Robust Policies for the Transformer Acquisition and Allocation Problem

As the electric transmission system in the U.S. ages, mitigating the risk of high-voltage transformer failures becomes an increasingly important issue for transmission owners and operators. This paper addresses this issue by presenting an in-depth study of different policies to manage the acquisition and allocation of high-voltage transformers over time. We analyze PJM’s transmission system by simulating and evaluating different policies under various assumptions and parameter settings. This allows us to characterize different policies and more generally learn about the behavior of the system. Our findings conclude that the approximate dynamic programming-based approach introduced in Enders et al. (2008) outperforms the policy that PJM currently uses based on several performance measures. We analyze issues of practical importance to PJM such as the effect of system wide optimization vs. optimization by transmission owner. Our findings suggest that system wide decision making considerably reduces the costs associated with transformer failures and replacements.