Impact of renewable energy quotas and emission trade on generation planning

Growing environmental concern and compelling regulatory directives have forced Generation Companies (GEN-COs) to revise criteria previously used for long term generation expansion planning. Constraints on renewable energy production and on CO₂ emission affect the economy of generation acting as a powerful drift towards the adoption of novel generation technologies. In the present work, the mathematical model of generation planning is presented aiming at the maximization of the net present value of the investment made in generation expansion, taking all the above limitations into account. A model is developed with reference to the present and the future generation mix of a given GENCO. The Lagrangian Relaxation method is used to solve the generation planning model requiring the solution of many sub-problems each relative to one generation plant a time. The solution of these sub-problems, obtained by dynamic programming, is interesting in its own right since it allows the decision maker to gauge the economic impact of the different generation technologies now available.