IEEE Power & Energy Magazine - July/August 2016 - 11

guest editorial

Hugh Rudnick and Luiz Barroso

facing uncertainties
the economics of transmission networks

Power system transmission
is at the core of modern wholesale
electricity markets, allowing for competition to take place among generators. thus, its adequate development is
of utmost importance to ensure market
efficiency with benefits to consumers.
However, with the rapid incorporation of massive renewables into current power markets, new economic
and technical challenges are arising in
transmission planning, building, and
integration, with a network needing
to change with a faster dynamic faster
than the one we were used to.
the main challenge is the need for
new regulatory procedures and mathematical models to explicitly factor in
new uncertainties and risks. Discussions arise on proactive planning, anticipating bulkier transmission paths to
cope with risks, identifying adequate
cost-allocation schemes, incorporating
competitive transmission expansion,
and facing socioenvironmental challenges. the issue of distributed generation coordinating with transmission
expansion appears as a new challenge.
in europe, discussions are ongoing
about massive transmission investment
and the need for economic signals to
respond to these requirements.
with all these challenges in mind,
we solicited a group of authors worldwide to contribute to this issue of IEEE
Power & Energy Magazine, illustrating
how uncertainties are being faced in the
Digital Object Identifier 10.1109/MPE.2016.2551959
Date of publication: 16 June 2016

ieee power & energy magazine

development of transmission networks.
as our lead article indicates, transmission-expansion planning (teP) is an
important activity and clouded by uncertainties, becoming a complex problem, vital to ensure the proper functioning of restructured electricity markets.
timely and cost-effective transmission
expansion is essential for ensuring secure and reliable electricity service to
customers, enhancing competition, and
ensuring market efficiency in electricity markets.
our first article, by Constantin Velásquez, David watts, Hugh rudnick,
and Cristian Bustos, provides a broad
conceptual framework for teP under
uncertainty. the authors argue that as
any decision under uncertainty is made
before the uncertainty is revealed, addressing uncertainties allows for hedging against risks caused by the outcomes
of these decisions. this article analyzes
uncertainty: its nature (aleatory or epistemic), its structure (known, unknown,
and unknowable), its timescale (short,
medium. and long term), and its source
(from wind speed to public opposition).
it ends with a review of optimization
approaches to teP under uncertainty,
emphasizing that they are all currently
unable to deal with multiple and varied
uncertainties. stochastic programming
and robust optimization are both valid
alternative approaches to medium-term
teP, requiring primarily methodological improvements. although the economic foundation of stochastic programming on expected utility theory is
unmatched, robust optimization may be

preferable because of tractability issues
of stochastic programming.
the second article, by Benjamin F.
Hobbs, Qingyu Xu, Jonathan Ho, Pearl
Donohoo, saamrat Kasina, Jasmine
ouyang, sang woo Park, Joseph eto,
and Vijay satyal, indicates that the problem of whether, where, when, and what
type of transmission facilities should be
built to minimize costs or maximize
net economic benefits has always been
a challenge in the power industry. But
it has become more complex as new
transmission, generation, and demandside technologies emerge. they argue
that the next generation of transmissionplanning tools needs to recognize three
key considerations when quantifying
the economic benefits that transmission investments can provide: systemlevel interactions among transmission
and generation investments, variation in
generation and load conditions and uncertainty concerning long-run drivers of
supply and demand conditions, and the
ability to adapt the system as conditions
change in unexpected ways. they formulate and evaluate a new proactive
adaptive transmission planning paradigm for managing economic risks in
transmission expansion, modeling uncertainty with stochastic programming.
we asked ignacio J. Pérez-arriaga,
the author of the third article, to help us
understand how distributed generation
may change the future development of
transmission. He emphasizes the substantially different challenges facing
power systems, mostly due to the irruption of distributed energy resources
july/august 2016

Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - July/August 2016