Decision-Making in Energy Systems With Multiple Technologies and Uncertain Preferences

Energy systems are complex systems consisting of different decision making entities: policy makers (or system operators), generation companies, utility companies, and consumers. In this paper, the focus is on the decisions made by different market competitors, such as the energy generation companies (GENCOs) and their interactions with the policy makers. The goals of the independent system operators (ISOs) in a deregulated market are to minimize the policy cost and to maximize renewable energy penetration. The problem formulation presented in this paper is aimed toward helping the ISO in modeling the lower-level GENCOs´ decision problems. GENCOs compete in energy production, while maximizing their net present values and minimizing their capital investments. The market players´ decisions result in a lower-level market equilibrium problem, which is formulated as a complementarity problem. The existence and uniqueness of the solution for the lower-level problem are shown. The main aims of the paper are to study the effect of stakeholders´ preferences on the solution of the complementarity problem, to analyze the effect of the ISO´s design parameters on the generation equilibrium quantities, and to simulate the stochastic complementarity problem using different techniques. The applications of the proposed decision-making framework include computational modeling of policy design scenarios, such as in feed-in-tariff policies.