A generation expansion planning model of a strategic electricity generating firm

Abstract

Abstract--This paper derives a mathematical structure for investment decisions of a profit-maximising and strategic producer in liberalised electricity markets. The paper assumes a Cournot producer in an energy market with nodal pricing regime. The Cournot producer is assumed to have revenue from selling energy to the pool. The investment problem of the strategic producer is modelled through a leader-follower game in applied mathematics. The leader is the strategic producer seeking the optimal mix of its investment technologies and the follower is a stochastic estimator. The stochastic estimator forecasts the reactions of other producers in the market in response to the investment decisions of the producer in question. The stochastic estimator takes the investment decisions of the producer and it calculates the stochastic prices. The mathematical structure is a stochastic linear bilevel programming problem. This problem is reformulated as a stochastic MILP problem which can be solved using the commercially available software packages. Finally, the developed mathematical structure is applied to a six-node example system to highlight the strengths of the whole approach.

Sustainable resource planning in energy markets

“…The expansion planning problem was modeled as an incomplete information environment [12], in which a participant could potentially lower its payoff if it does not consider the opponents" strategies. A stochastic mixed-integer linear programming (MILP) approach was applied in [13] to form a structure for making profit-maximization based expansion decision in a liberalized market. Reference [13] also performed a 4 thorough literature review in the area of generation investment.…”

“…A stochastic mixed-integer linear programming (MILP) approach was applied in [13] to form a structure for making profit-maximization based expansion decision in a liberalized market. Reference [13] also performed a 4 thorough literature review in the area of generation investment.…”