Development of an Analytical Model for Generation Expansion Planning as a Tool to Provide Guidelines for Preventing Instability in the Long-Term Electricity Market

Abstract

This paper considers the problem of deciding multiperiod investments for generation expansion planning (GEP) in restructured<br><br>power systems. This problem has presented a challenge for both market managers and suppliers regarding the stability in the<br><br>electricity market and minimum income for suppliers over the planning period. In this paper, an analytical model for studying<br><br>the GEP problem from the viewpoint of a central management entity is presented. The aim of this method is to establish a<br><br>dynamic balance between energy supply and demand by adjustment of GEP over the horizon of planning so that not only the<br><br>expected profit is provided for all new generating plants but the long-term stability in the electricity market is also improved. This<br><br>analytical model can be utilized by regulatory bodies to obtain some guidelines and thereby to set their policies for improving<br><br>GEP and preventing instability in the long-term electricity market. To do so, in this study, the uncertainties of demand and supply<br><br>have been modeled through two stochastic processes. Furthermore, the market price dynamics and their mutual effects on the<br><br>GEP’s results have been considered. Finally, this nonlinear dynamic optimization problem is solved using a modified genetic<br><br>algorithm (GA). The efficiency and ability of the proposed method are examined on a test power system. © 2011 Institute of<br><br>Electrical Engineers of Japan. Published by John Wiley & Sons, Inc.