Optimal timing of transmission line investments

An important issue in the expansion of power supplies is the question of whether local supplies should be served from an integrated network or from isolated plants. Conventional analysis would consist of a comparison of the present-value costs of building and operating a transmission line plus the marginal cost of centrally generated electricity, versus the present-value capital plus operating costs of a local generation alternative. This is appropriate, however, only in cases in which the load to be served remains constant. With growing loads the unit costs of a transmission line alternative continue to fall over time while those of the isolated alternatives do not. A least-cost optimization model has been developed that identifies the year in which a switch-over from isolated to network supply results in the least-cost solution.