A methodology for Generation Expansion Planning for renewable energy economies

In the restructured electricity industry, Generation Expansion Planning (GEP) is an oligopoly of strategic Generation Companies (GenCos) with private information investing in a highly uncertain environment. Strategic planning and uncertainties can result in market manipulation and underinvestment (short-term planning). We present a forward moving approach to the problem of investment expansion planning in the restructured electricity industry. This approach accounts for technological, political and environmental uncertainties in the problem's environment and leads to long-term planning. At each step of the approach we present a block investment market mechanism that has the following features. (F1) It is individually rational. (F2) It is budget balanced. (F3) The expansion and production allocations corresponding to the unique Nash Equilibrium (NE) of the game induced by the mechanism are the same as those that maximize the sum of utilities of the producers and the demand. (F4) It is price efficient that is, the price for electricity at equilibrium is equal to the marginal utility of the demand and to the marginal cost of production by producers with free capacity.

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