Probabilistic welfare analysis for system adequacy — Analytical and numerical insights

Current developments as the progressing integration towards a European Single Market for Electricity and the growing share of renewable energies call for infrastructure expansions. Furthermore, increasing intermittency of generation and resulting low electricity wholesale price levels challenge the profitability of conventional technologies and hence system adequacy. In this paper, the value of transmission and generation capacity as components of system adequacy are derived. Starting from a one node setting, generation adequacy is analytically investigated within a social welfare approach and complemented with numerical illustrations. Augmenting the setting to two aggregate nodes with connecting transmission infrastructure, different components adding to the value of transmission capacity are identified and analyzed.