Analysis of island power investment decision models under different market stages

Island power investment is very important and intractable to the construction of island power system and development of the electricity market, for various market models, and in which power producers will have different investment strategies and different investment considerations of other power producers. This paper firstly gives an overview on the trading patterns as well as market structure in electricity market, and also an analysis of investment decisions in different market modes. On the basis of characteristics of market modes, three kinds of investment decision modes are established. Besides, net present value method is applied to the analysis of investment decision under oligopoly market mode; real option method is applied to the analysis of investment decisions including fuel prices, price subsidy rate, depreciation rate, and the impact of competition under the market environment. Results indicate that investment threshold is mostly sensitive to price subsidy rate and power producers are tend to make advanced investment where competition exists.