Coordination and uncertainty in strategic network investment: case on the North Seas grid

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Title: Coordination and uncertainty in strategic network investment: case on the North Seas grid
Authors: Konstantelos, I
Moreno, R
Strbac, G
Item Type: Journal Article
Abstract: The notion of developing a transnational offshore grid in the North Sea has attracted considerable attention in the past years due to its potential for substantial capital savings and increased scope for cross-border trade, sparking a European-wide policy debate on incentivizing integrated transmission solutions. However, one important aspect that has so far received limited attention is that benefits will largely depend on the eventual deployment pattern of electricity infrastructure which is currently characterized by severe locational, sizing and timing uncertainty. Given the lack of coordination between generation and network developments across Europe, there is a real risk for over-investment or a premature lock-in to options that exhibit limited adaptability. In the near future, important choices that have to be made concerning the network topology and amount of investment. In this paper we identify the optimal, in terms of reduced cost, network investment (including topology) in the North Seas countries under four deployment scenarios and five distinct policy choices differing in the level of offshore coordination and international market integration. By drawing comparisons between the study results, we quantify the net benefit of enabling different types of coordination under each scenario. Furthermore, we showcase a novel min–max regret optimization model and identify minimum regret first-stage commitments which could be deployed in the near future in order to enhance strategic optionality, increase adaptability to different future conditions and hence reduce any potential sub-optimality of the initial network design. In view of the above, we put forward specific policy recommendations regarding the adoption of a flexible anticipatory expansion framework for the identification of attractive investment opportunities under uncertainty.
Issue Date: 29-Mar-2017
Date of Acceptance: 20-Mar-2017
ISSN: 1873-6181
Start Page: 131
End Page: 148
Journal / Book Title: Energy Economics
Volume: 64
Copyright Statement: © 2017 Elsevier B.V. All rights reserved. This manuscript is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
Sponsor/Funder: Engineering & Physical Science Research Council (E
Engineering & Physical Science Research Council (EPSRC)
Funder's Grant Number: EP/K039326/1
Keywords: Energy
1402 Applied Economics
0913 Mechanical Engineering
0906 Electrical And Electronic Engineering
Publication Status: Published
Appears in Collections:Faculty of Engineering
Electrical and Electronic Engineering
Centre for Environmental Policy
Faculty of Natural Sciences

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