A Probabilistic Analysis of Transmission Right Valuation Under Market Uncertainty

Haibin Sun, Shi-Jie Deng, A.P. Sakis Meliopoulos, George Cokkinides, George Stefopoulos, Timothy D. Mount

Abstract


The paper presents a simulation-based approach for Financial Transmission Right (FTR)and Flowgate Right (FGR) valuation. We calculate the probabilistic distributions of FTR and FGRvalues under market uncertainties resulting from fluctuating system loads, non-constant supply/demand bids, and other system contingencies such as unplanned transmission circuit etc.A theoretical framework consisting of a multilateral-transaction model, a nonconforming electricload model, and transmission right valuation models under different market structures incorporatingmarket aforementioned uncertainties is proposed. A Monte Carlo Simulation procedure is employedto obtain the distributions of FTR and FGR values. Numerical implementation of the proposedapproach is illustrated on a sample test system.

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