Evaluation of generation expansion investment under competitive market environment

This paper proposes a new approach of generation expansion planning and its risk assessment under the competitive market environment. Different from the traditional probabilistic production costing (PPC) method under monopoly environment which is based on the deterministic generator loading priority list, the uncertainties of biddings for long-term contracts in electricity market are introduced into the new model. Based on the probability distribution of the surplus on bidding price over marginal cost, the distribution of expected generated energy for a given period can be achieved to calculate the profit of a generator. In order to manage the risks of the investment on generation expansion project, a risk assessment tool called conditional value at risk (CVaR) is used. It gives the investors an intuitionistic criterion for making investment decision. A numerical example is given in this paper to valid the method.