Strategic Generation Investment Under Uncertainty Via Benders Decomposition

We address the generation investment problem faced by a strategic power producer and consider a detailed description of the uncertain parameters involved, namely, rival producer investment and market offering, and demand growth. To identify optimal investment decisions, we consider a target year and propose a bilevel model whose upper-level problem determines investment and offering decisions to maximize expected profit, and whose many lower-level problems represent market clearing conditions per demand block and scenario. Since the producer total expected profit is sufficiently convex with respect to investment decisions, a Benders´ decomposition approach is proposed that results in a tractable formulation even if hundred of scenarios are used to describe uncertain parameters. Extensive numerical simulations based on realistic case studies show the good performance of the proposed decomposition approach.