Transmission investments are currently needed to meet an increasing electricity demand while enhancing security of supply, promoting competition, and integrating renewable energy. A key issue when assessing the benefits from an expanded grid concerns the valuation of the uncertain cash flows that result from the expansion. We develop a valuation model which combines optimization techniques, Monte Carlo simulation over the expansion project lifetime, and market data from futures contracts on commodities. Our multivariate stochastic model accounts for uncertain dynamics on both the demand side and the supply side. It can assist decision makers when confronted with challenging strategic portfolio choices regarding generation and transmission infrastructures. Though our ultimate goal is to develop a generalizable model, to demonstrate the model by example we consider a simplified network with two nodes. We then focus on the proposed Western HVDC subsea link between England/Wales and Scotland, and simulate the whole distribution of effects on major system variables over its useful life. (c) 2012 Elsevier Ltd. All rights reserved.