A Game-Theoretic Model for Generation Expansion Planning: Problem Formulation and Numerical Comparisons

This paper presents an application of noncooperative game theory to generation expansion planning (GEP) in a competitive electricity industry. We apply the Cournot model of oligopoly behavior to formulate a GEP model that may characterize expansion planning in a competitive regime, particularly in pool-dominated generation supply industries. Numerical experiments are conducted on a test system to analyze generation investment and market participation decisions of candidate expansion units that vary in costs and forced outage rates. The numerical results point to: (1) greater industry expansion and system reliability under Coumot competition than under centralized expansion planning and (2) higher probabilistic measures of reliability from multi-player expansion than from expansion by a traditional monopolist with an equivalent reserve margin requirement. Furthermore, we summarize analytical results involving a simplified version of the GEP game.