A planning model for investor firms in the generation sector and financial analysis

This paper presents a comprehensive modeling approach that addresses the long-term generation expansion planning problem for an investor firm operating in a deregulated market environment. The mathematical model facilitates the ability of multi-period investments in multi-technology generation options. This work provides insight into the nature of the planning problem by determining optimal timing for capacity installation as well as long-term energy dispatch from the firm's perspective. The electricity market is imposed on the model by providing forecasted electricity prices over the planning horizon. The model is tested with various scenarios for acceptable values of internal rate of return, electricity price and available budget. Also issues of trade off between financial risk and return and fuel price volatility are discussed in brief. An investor firm with three technology options for investment is considered.