A market-based analysis on the generation expansion planning strategies

The demise of the native franchise markets and emergence of competitive markets for electricity generation service is changing the way that electricity is and will be priced and is making increasingly difficult for market participants to appraise the prospects for the future electricity market. As a result, conventional generation expansion planning (GEP) problems determining the least-cost capacity addition plan that meets forecasted demand within pre-specified reliability criteria over a planning horizon (typically 10 to 20 years) is becoming no more valid in these competitive market environments. Therefore, it is necessary to develop a new methodology for generation investment, which is applicable to changed business environments and is able to address the post-privatization situation where individual generation firms seek to maximize their return on investment against market prices. In this paper, we present a new formulation of generation expansion planning problems for privatized generation firms, which is applicable in competitive electric power industries. Based on the game-theoretic approach for the evaluation of future incomes of individual generation firms, we propose a new mathematical formulation and efficient solution scheme considering changed electric power industry environments.