Incorporating catastrophe insurance in power distribution systems investment and planning for resilience enhancement

Severe damage and high economic losses caused by frequent extreme disasters are becoming unbearable for distribution system operators (DSOs) under climate change. In order to cope with extreme disasters, this paper proposes an investment portfolio and planning framework of multi-resource for resilience enhancement. In the investment portfolio and planning framework, insurance is incorporated to mitigate high economic losses as a risk sharing and resilience enhancement supplementary strategy, and co-optimized with security investment from the perspective of DSOs. Firstly, the insurance investment is modelled based on Gordon-Loeb model according to insurance industry principles and formulated as constraints by piecewise linearization techniques. Secondly, the investment portfolio and planning framework proposed in this paper is modeled as a scenario-based two-stage stochastic mixed integer linear optimization program (MILP). In the first stage, DSO makes investment and planning decisions including energy storage (ESS) allocation, line hardening strategy and insurance investment. Both operation strategies of normal operation scenarios and extreme disaster scenarios under climate change are optimized in the second stage. Finally, progressive hedging (PH) algorithm is applied to solve the two-stage stochastic MILP model. The proposed model and algorithm are tested on the modified IEEE 33-bus test system. The results verify the validity of investment portfolio and planning framework, and the results show that portfolio investment considering insurance can realize resilience enhancement in both load shedding and economic losses.