Power transmission investments analysis: A new financial evaluation framework for South Africa

The paper discusses the study to develop a new financial evaluation framework for power transmission expansion projects in South Africa (SA) that can also be suitable for handling change and uncertainty in the electricity supply industry. The research design followed in the study is model building, testing and application empirical research. The development of the new financial evaluation framework is based on the literature study and the gaps identified in the current transmission expansion investment evaluation methods stipulated in the South African grid code. The proposed framework for financial evaluation of transmission expansion projects investments in South Africa incorporates the modelling of project options and uncertainties, Monte Carlo simulations, real option analysis and decision analysis. The supporting pillar of this framework is strategic analysis. A computer financial evaluation model based on the new framework was built to test the framework. A comparison of the test results to the model currently used to evaluate transmission line projects in South Africa is also presented.