Impact of equipment failures and wind correlation on generation expansion planning

• Current expansion models overlook some of the involved uncertainties.
• We quantify the impact of failures and wind correlation on expansion decisions.
• We use a bilevel model to determine optimal generation expansion decisions.
• Uncertainty of failures and wind correlation is represented by a scenario set.
• A 24-bus case study is used to drawn quantitative and qualitative conclusions.

Generation expansion planning has become a complex problem within a deregulated electricity market environment due to all the uncertainties affecting the profitability of a given investment. Current expansion models usually overlook some of these uncertainties in order to reduce the computational burden. In this paper, we raise a flag on the importance of both equipment failures (units and lines) and wind power correlation on generation expansion decisions. For this purpose, we use a bilevel stochastic optimization problem, which models the sequential and noncooperative game between the generating company (GENCO) and the system operator. The upper-level problem maximizes the GENCO's expected profit, while the lower-level problem simulates an hourly market-clearing procedure, through which LMPs are determined. The uncertainty pertaining to failures and wind power correlation is characterized by a scenario set, and its impact on generation expansion decisions is quantified and discussed for a 24-bus power system.