Economic Analysis Of Transmission Investment On Smart Grid

Smart grid construction is based on a coordinated basis to build the backbone of ultra-high voltage grid, grid expansion and the voltage level of the grid. Through advanced communications, information, computer, sensor and other advanced technology, smart grid can improve the security, interactivity, applicability and economy of our power system, and make the different forms of power generation units’access feasible, so it is also called strong smart grid. According to development plan of the China State Grid Corp, the power systems in our country started a comprehensive construction phase of smart grid in2011. At present, it is the initial stage of smart grid development. Therefore, the analysis of the construction of smart grid power generation companies, power users and transmission companies as well as the total social welfare effects on power systems plays an important role in the development of smart grid in China. At the same time, the discussion of transmission investment enterprises how to effectively evaluate the transmission investment decision under the uncertain condition is a precondition of smooth and efficient construction of smart grid.This paper introduces the concept and characteristics of intelligent power grid, and the problem faced by the transmission investment based on uncertain environment. Then according to smart grid construction’s requirements of the investment of transmission, attempt to introduce the theory of locational marginal price into the transmission investment market, analysis of the impact of transmission investment decision in the electricity market, power enterprise, power consumers, transmission investment enterprises and social welfare, and discuss the social benefits brought by transmission expansion in the short term transmission congestion situation. This paper mainly uses the method of static analysis, refer to the optimal power flow calculation standards, based on short-term marginal nodes the price mechanism, establish transmission efficiency model in the condition of maximizing the social welfare. It is found that in the non-blocking conditions, both the prices of power node or marginal node load are equal, and then there is an optimal transmission capacity in the power grid. When the transmission capacity constraints in the power grid transmission capacity is less than optimal, or blocking appeared in the network, the node price margin on each node will be different, resulting in the loss of power plants, power producer and consumer surplus. Therefore, the transmission network expansion or grid interconnection can effectively ease congestion, increase the economic benefits of consumers and producers, and ultimately increase the total social welfare. Power enterprises can get blocked income through the network congestion, and therefore lack incentives to ease congestion. But on the other hand, the static analysis take the social cost as profit incentive in a transmission investment, therefore to estimate changes in blocking earnings is key issue to consider the investment decision of transmission business.In the long term, according to the enterprise with purpose of obtain income from transmission congestion, how to evaluate transmission investment under uncertain condition in blocking proceeds is crucial. This paper analyzes the limitations of the static model of traditional net present value method in the study of transmission investment. Net present value may underestimate the project because of ignoring the time value and option value. On this basis, introduces real option method analyzes the application and characteristics of real options in investment decision, consider the active management of the project. With the passage of time, the uncertainty reduced, and we can get more information, it will bring benefits from dynamic management of the project investment. Three methods developed from evolution of financial option are discussed: binominal tree. Monte Carlo model and B-S model, then analysis and compare of the advantages and disadvantages of the three models. After a brief discussion of the B-S model and its limits, introduces the binomial tree model embedded Monte Carlo simulation in detail. The combination of Monte Carlo simulations with binomial tree model solved the limit of B-S model which can only analyze the European option and not analysis of compound option, has a wider range of applications and can quickly adapt to the change of more flexible. Binomial tree model is straightforward and easy to understand for decision maker of power transportation projects.