Application of the value-based approach to the planning of customer delivery systems

Customer delivery systems have been planned to deterministic criteria for a long time. With these criteria, new capacity is determined when the system load is just equal to the system limited time rating. Even, some electrical utilities in North America allow for some positive reserve margin in order to cover for load forecast uncertainty. These deterministic criteria do not quantify the reliability of the system and in many situations, can result in over-designed systems and therefore, the electricity users can end up paying higher prices for electricity. In a competitive electricity market, transmission system owners or providers should try to keep the cost of upgrading, operating and maintaining their systems as low as possible while meeting the expectations of their customers and regulatory rules. This paper describes the application of a value-based approach to the planning of customer delivery systems. In this application, the reliability of the system is expressed as a function of the reserve margin and the optimal reserve level is obtained when the total system cost is minimal. Sensitivity studies are carried out to determine the impact of changes in some key parameters on the optimal reserve margin. An example is presented to illustrate the concepts involved.