A Review on Generation Expansion Planning under Oligopolistic Games and Strategic Flexibility

BRUNO MOMBELLO; DR.-ING. FERNANDO OLSINA; DR.-ING. ROLANDO PRINGLES

San Juan

Congreso; 2022 IEEE Biennial Congress of Argentina (ARGENCON); 2022

IEEE Sección Argentina

Investment decisions in power generation are often supported by Generation Expansion Planning studies. In this area, significant efforts have been made to model strategic behavior of investors and the implication of their decisions in decentralized markets with imperfect competition. Usually, dynamics of oligopolistic markets are represented as a sequence of equilibria framed in Game Theory. This approach, however, is incomplete when assessing strategic flexibility embedded in irreversible generation investments under uncertainty. The most suitable decision framework for considering flexibility is Real Options Valuation. In order to incorporate both tools, the theory of Option Games was developed. This article makes an extensive literature review of the use of both techniques, focusing on the expansion of the generation system and in the integrated co-planning with the transmission grid. It was noted that these tools are not widely used together. Unsolved issues and limitations of the current long-term planning and power market models are identified. This work is aimed as a useful reference to guide future research in this field