Risk Decision And System Dynamics Modeling Of Generation Investment In Electricity Market

The electricity market reform brings new challenges to the development of generation industry. Generation companies turn into the market competitors which must be operate independently, and the investors are at greater risks from much uncertainty and must assume responsibility for their profits or losses. Owing to the joint effect of the relationship of supply and demand, the electricity price and the game of market participants, the generation investment is characterized by randomicity, complexity and nonlinearity, and it is difficult to co-ordinate generation with transmission, distribution and supply. In the electricity market environment, the objective of generation investors is to maximize investment profits, and the speed of capacity growth often change unpredictably, sometimes it is too fast and sometimes too slow. And it is difficult to keep the balance between demand and supply in the power system. Therefore, for a generation company, how to make the most optimized investment decision is an important problem; for governments or regulators, it is a difficult and important task to explore reasonable new generation capacity in the future so as to guide the investors to construct the generation projects and keep the balance between demand and supply in the power system.Based on the above analysis, this paper research the risk decision and system dynamics model of the generation investment in the electricity market. The research is of great theoretical and practical significance.At the first part of this paper, three aspects are included: the generation investment behaviors before deregulation and those after deregulation are compared; a summary concerning the features of generation investment decision under the electricity market is made; an overview of the research progress in China and abroad about generation investment is given.Secondly, basic theories of Conditonal Value at Risk (CVaR) and System Dynamics (SD) are elaborated so as to form a theoretical base for the generation investment research, such as CVaR model, conception of SD, description of SD on system, etc.Thirdly, from the generation companies'standpoint, the uncertainties and risks on generation investment are analyzed, and the approach of generation investment decision based on CVaR is proposed, which is a research about how the investors make their selection on portfolio investment. Two CVaR models based on investment portfolio are put forward in which three uncertain factors are considered: the construction cost of a MW, the operation cost of a MWh, and the bus-bar tariff. The models can be used to solve the problems about the maximize benefits and minimize risks of the investment projects so as to lower risks and ensure that investment cost can be returned. The example analysis is given based on the proposed model with the help of Matlab. The analysis conclusion show how the investment proportion, the profit and CVaR vary with the changes of a certain level of risk, which is significant to confirming the investment proportion in different projects.Fourthly, from the whole system'standpoint, in this paper the System Dynamics model for generation investment is proposed which can be used to simulation the scheduled investment capacity in the future by the self-regulating of the SD model. In the proposed model, the complex causality among the generation investment is considered on the basis of keeping the balance between demand and supply in the power system. The proposed model consists of a variety of feedback paths reflecting the complex relationship of generation investment in each stage, from the generation capacity application, examination and approval, the construction, the operation to the retirement. In this model, the system capacity, maximum load, generation profit and cost are taken as the main level variables; the subsidies of the reduction of emission of greenhouse gas by using renewable energy are included in the generation profit. In addition, numerical simulations are carried out based on the proposed model and the sensitive factors among the model such as spot price and load growth rate are identified. The simulated dynamic investment of Hunan power system shows the validity and feasibility of the proposed system dynamics model. Finally, the scheduled investment capacity in Hunan power system in the future five years (2008-2013) is forecasted. The simulation conclusion is helpful to guide the investors to construct the generation projects, and provides the governments or regulators a basis for establishing generation investment policies.