The electric industry has changed from a vertically integrated industry to a market based competitive industry. The incentives of market participants have changed and there is additional uncertainty since the industry is no longer vertically integrated. Traditional methods used in investment planning are no longer adequate; thus, improved methods are needed to provide a better valuation of investments. This research concentrates on transmission planning and real options analysis. The transmission planning research applies real options analysis and compares it to other approaches. Real options analysis is preferred as it can model the managerial flexibility that takes place in investment planning. In the process of researching real options analysis, wind energy planning was also studied and this topic is presented as well. The wind energy planning research applies real options analysis to the problem of wind energy being uncontrollable and examines other methods that are recommended to remedy this problem.
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