Investment Decisions in Distribution Networks Under Uncertainty With Distributed Generation—Part I: Model Formulation

Investment in distributed generation (DG) is an attractive distribution planning option for adding flexibility to an expansion plan, mainly by deferring network reinforcements. In this first part of a two-part paper, a risk-based optimization approach is proposed to model a multistage distribution expansion planning problem that takes DG into account as a flexible option to temporarily defer large network investments. Five features of the installation of DG related to location, size, type, operation and timing are all optimized. The evolutionary particle swarm optimization (EPSO) method is applied to solve this mixed integer nonlinear problem. A return-per-risk index is proposed to assess expansion investments. This index achieves an efficient synergy between the expected return and the risk of investments by performing Monte Carlo simulations. In turn, the flexibility of network investment deferral is assessed through a real option valuation. Finally, in order to quantify the investment deferral benefit, the expected return from a traditional expansion plan (without DG) is compared to the return obtained from a flexible expansion plan (with DG). In the companion paper, the proposed approach is tested on a typical Latin American distribution network; implementation aspects and analysis of numerical results are presented.