Market-based Generation Expansion Planning

Generation expansion planning is the problem of determining the optimal type of energy technologies to be installed, time, and construction location. This problem becomes even more complicated within the context of electricity markets, including their volatilities and shocks. This work addresses the problem of optimal generation expansion planning, considering the market operation through introducing unit commitment constraints. It considers the penetration of distributed energy resources into the system, including energy storage systems and demand response programs. The methodological framework is based on linear programming techniques and has been tested in an illustrative power system under various assumptions regarding CO2 emissions limits as well as CO2 and natural gas fuel prices. The results highlight that renewable power units are installed in all cases, while non-renewable power units are installed only if they are low-carbon (biomass and nuclear) or they are equipped with a CCS technology (hard coal and natural gas).