Valuing the dynamic power flow control of FACTS devices under uncertainties

Restructuring of the power industry that have arisen from the unbundling of the electrical industry have led to complex and still unsolved problems related to transmission system expansion owing to the singular characteristics of their investments. These difficulties are currently issues of considerable interest for researchers and policy-makers since the lack of adaptation of the transmission infrastructure may damage operations and free competition in the emerging electrical sector. In this context, some degree of dynamic control within the transmission investments is deemed to be necessary in order to face the increasing uncertainties of the new market scenarios through contingent claims, which allow the planner to adapt the investment under scenarios where the uncertain variables unfold unfavorably. Under this conjuncture, this paper presents an approach for valuing the dynamic power flow control of FACTS devices under uncertain variables of liberalized power markets as well as the evaluation of the flexibility of power transmission investments through a Real Option Valuation approach based on the Least Square Monte Carlo method. In order to illustrate the proposed valuation approach, a study case is presented, where it shows that the flexibility of the dynamic controllers under uncertainties could plenty justify the higher cost of these devices.