Impact of Equipment Failures and Wind Correlation on Generation Expansion Planning

TL;DR

This paper examines how equipment failures and wind power correlation influence generation expansion planning using a bilevel stochastic optimization model in a deregulated electricity market.

Contribution

It introduces a bilevel stochastic optimization framework that explicitly incorporates equipment failures and wind correlation into expansion planning decisions.

Findings

Equipment failures significantly affect expansion choices.

Wind power correlation impacts profitability and investment decisions.

The model provides insights into uncertainty management in power system planning.

Abstract

Generation expansion planning has become a complex problem within a deregulated electricity market environment due to all the uncertainties affecting the profitability of a given investment. Current expansion models usually overlook some of these uncertainties in order to reduce the computational burden. In this paper, we raise a flag on the importance of both equipment failures (units and lines) and wind power correlation on generation expansion decisions. For this purpose, we use a bilevel stochastic optimization problem, which models the sequential and noncooperative game between the generating company (GENCO) and the system operator. The upper-level problem maximizes the GENCO's expected profit, while the lower-level problem simulates an hourly market-clearing procedure, through which LMPs are determined. The uncertainty pertaining to failures and wind power correlation are characterized by a scenario set, and their impact on generation expansion decisions are quantified and discussed for a 24-bus power system.