Capacity Expansion in Non-Regulated Electricity Markets

Investment in new generation is not well understood in a deregulated environment. While 20 years of literature focused on capacity expansion in a regulated world it is only since 2001 that researchers examine the gaming aspect of investment in electricity generation. The natural representation of a capacity expansion game has two stages: first to determine the capacity and to choose the production afterwards. In some cases one stage games can be used to replace two stage games. In most cases they can’t.