Generation Capacity Expansion Planning in Deregulated Electricity ...

Salvage value Svl(m,k) is the depreciated value of the commissioned plant of technology m at year k,

and is given by (2).

{ 1 D (P k ) }

Svl(m.k) = Nc(m,k)* 1000*Pc(m,k)*

− rate − + 1

(2)

Nc(m, k) New capacity **in**vestment of technology m **in** year k, MW

Pc(m, k) Capital cost of plant of technology m **in** year k, $/kW

Drate

( k ) = R(

k ) Ac(

k )

Ap −

( k)

E(

m,

b,

k)

∗ Pr(

b k)

∑∑

R ,

= m b

Depreciation rate for plant value

The annual profit of the firm, Ap(k), is the revenue earned by it from sell of energy net of its total

annual cost (3).

R(k) Revenue earned by the firm **in** year k, $

Ac(k) Annual cost of the firm **in** year k, $

The revenue earned by the firm by sell**in**g energy generated by its units at the market price, is given

by (4).

E(m, b, k) Energy generated by the firm from plants of technology m **in** demand

block b of year k, MWh

Pr(b, k) **Electricity** price **in** time block b of year k, $/MWh

The parameter Pr(b,k) is typically a long-term estimate of the expected price trend **in** the electricity

market. It is very complex exercise to arrive at such an estimate **in** the long-term. Typically the

**in**vestor firm would have to rely on market trends, economic **in**dications judiciously choose there

values. It may also be possible to revise the estimates as the plan progress.

In (3), Ac(k) denotes the total annual operations, ma**in**tenance and capital **in**vestment costs of all

plants to produce the energy E(m, b, k). The components of Ac(k) are fuel cost, variable O&M cost,

fixed O&M cost and **in**vestment cost, and is given by (5).

11

(3)

(4)