  Strategic valuation of efficient and well-timed network investments under
uncertain electricity market environment has become increasingly challenging,
because there generally exist multiple interacting options in these
investments, and failing to systematically consider these options can lead to
decisions that undervalue the investment. In our work, a real options valuation
(ROV) framework is proposed to determine the optimal strategy for executing
multiple interacting options within a distribution network investment, to
mitigate the risk of financial losses in the presence of future uncertainties.
To demonstrate the characteristics of the proposed framework, we determine the
optimal strategy to economically justify the investment in residential
PV-battery systems for additional grid supply during peak demand periods. The
options to defer, and then expand, are considered as multi-stage compound
options, since the option to expand is a subsequent option of the former. These
options are valued via the least squares Monte Carlo method, incorporating
uncertainty over growing power demand, varying diesel fuel price, and the
declining cost of PV-battery technology as random variables. Finally, a
sensitivity analysis is performed to demonstrate how the proposed framework
responds to uncertain events. The proposed framework shows that executing the
interacting options at the optimal timing increases the investment value.
