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