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.