IEEE Power & Energy Magazine - July/August 2016 - 25

future by policy making and market structure are out of the
scope of TEP, these actions are related in the long term, as
discussed in the following section.

Source of Uncertainty:
From Wind Speed to Public Opposition
Uncertainties are produced by different processes and have
different impacts on TEP. Similar sources of uncertainty are
grouped based on impacts on TEP and to a lesser extent on
process similarities, thus emphasizing risks (consequences)
rather than causes. Four primary sources of uncertainty and
one aggregate category are defined next. Distinguishing
between such sources has practical applications on identifying common models, relationships between different management strategies, and assessment of expansion projects.
The four primary sources of uncertainty in TEP are physical, economic, regulatory-geopolitical, and social-environmental. Physical uncertainties directly impact the physical
infrastructure of a power system (i.e., transmission system or
generation plants), cannot be controlled, and occur or vary in
small timescales ranging from seconds to a year. Examples
comprise outage of generation or transmission facilities,
inelastic loads, wind speed, hydrology, and natural disasters.
Economic uncertainties are the result of some economic
processes such as market clearing or macroeconomic equilibrium, for example, fuel prices, investment costs, and economic growth. Regulatory-geopolitical and social-environmental uncertainties result from complex political or social

Physical
Examples of
Uncertainties

* Outage of Generation
or Transmission Facilities
* Wind Speed and Wind
Farm's Output
* Hydrology and Water
Inflows to Reservoirs
* Hourly Residential Load
* Natural Disasters

Example of
Frequently
Used Model of
Uncertainty

Probability
Distributions

processes for which no quantitative model is available, such
as public opposition to transmission projects or terrorism.
Note that weather is not a primary source since the practical focus should be on risks and not causes. More precisely,
different risks result whether uncertainty produces outage
of facilities or public opposition to new transmission lines.
Risks due to facility outages are somewhat similar to those
produced by natural disasters. Hence, weather-related risks
are grouped under physical or social-environmental sources.
Uncertainties from the four primary sources can be modeled and then fed into some power system and market model
(Figure 7). Although modeling varies for each uncertainty
within the same source, some common modeling approaches
can be identified. For example, physical uncertainties such
as wind speed, hydrology, and hourly residential load are
often modeled by probability distributions. Instead, many
economic uncertainties are assumed to follow some stochastic process such as geometric Brownian motion or discrete
Markov chains. Finally, strategic scenarios and alternative
cases are used to model social-environmental and regulatory-geopolitical uncertainties.
Aggregate uncertainties in TEP are products of the interaction between different uncertainties. Such interactions are
captured by a set of power system and market models. Electricity prices, power flows, reliability standards, and total
system costs in a regulated industry are clear examples of
aggregate uncertainties. Complex uncertainties produced
by electricity markets are harder to classify because of the

Economic
* Investment Costs in
Existing and New
Technologies
* Inflation and
Interest Rates
* Economic Growth
* Demand Growth
* Fuel Prices and
Availability
Time Series and
Stochastic
Processes
Markov
Chains

Social and
Environmental
* Public Position and
Actions Toward
Generation or
Transmission Projects
* Right-of-Way
Negotiations
* CO2 Emissions and
Global Warming
Strategic
Scenarios.
Alternative
Cases

Regulatory and
Geo-Political
* RPS Goals and
Carbon Taxes
* Permitting Processes
and Permissions
* Wars and Terrorism

Strategic
Scenarios.
Alternative
Cases

Model of
Uncertainty Flow
Aggregate
Power
System and
Market Models

* Electricity Prices
* Power Flows
* Reliability Standards
* Total Investment Costs

figure 7. The sources of uncertainty in TEP related by power system and market models. Some common models for each
source of uncertainty can be identified.
26

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july/august 2016

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