A Price-Based Approach to Generation Investment Planning in Electricity Markets

A generation planning framework is developed for a competitive, energy-only electricity market. The framework developed combines decentralized merchant investment plans stemming from market signals and technological preferences, with centralized resource planning concepts to decide optimal time-ordered investment decisions. The investment decisions maximize the new entrants´ net surpluses and minimize the consumer interruption cost, accounting for many uncertain variables and technical details. The optimal plan given by the main centralized framework represents the system planner´s solution derived from the set of decentralized plans. An illustrative case study is given in the paper, applying the proposed framework to the Queensland region of the National Electricity Market of Australia.