Generation capacity investment dynamics in a liberalized power market

OLSINA, F.; HAUBRICH, H.-J.; GARCÉS, F.

Puerto Iguazú, Argentina

Conferencia; X ERLAC (Encuentro Regional Latinoamericano de CIGRE); 2003

Comité Nacional Argentino de CIGRE

Liberalization of the electricity generation industry has raised the question if power markets can handle effectively long-term supply reliability through adequate generation capacity investments. In this paper, a simulation model based on System Dynamics (SD) is proposed, with the aim of analyzing investment dynamics of power plants in a deregulated generation sector. Simulations suggest that there might exist serious problems to adjust timely generation capacity, showing the results a quite different view than predicted by classical microeconomic models. It is found that some system variables lead to periods of over-and-tight capacity, affecting cyclically prices, investments and generation adequacy. A sensitivity analysis is carried out to analyze how dynamics changes with changes in some external inputs. At the end of the paper some conclusions are discussed.