A decision support tool for generation expansion planning in competitive markets using System Dynamics models

This paper addresses the generation expansion-planning problem describing a model that generation companies and regulators can use to get insight to this problem and to more completely study and characterize different investment decisions. The simulation model considers a number of possible generation technologies and aims at characterizing the corresponding investment plans from an economic point of view having in mind that market prices, the demand growth, investment and operation costs, as well as other factors, are affected by uncertainties. With the objective of helping generation companies and regulators to carry out this planning, we adopted an approach based on System Dynamics. This methodology allows simulating the long-term behavior of electricity markets, namely to help getting insight into the way new generation capacity enters in the market in a liberalized framework. Finally, the paper presents results from a case study illustrating the use of this approach.