Generation Capacity Expansion Planning in Deregulated Electricity ...

Generation Capacity Expansion Planning in Deregulated Electricity ...

Fig. 14 shows the variation of J * with IRR for a range of IRR values. The optimal investment plan

corresponding to this IRR (denoted by IRR * ) represents the Base Case solution, and is discussed in

detail in the coming Sections. It can be seen from Figure that the optimal IRR * so obtained is 45.1%.

Table IX provides the firm’s optimal investment plan over the 15-year plan horizon. It can be

observed from this table that investment decisions are made in such a way that the firm can efficiently

utilize its available budget to maximize the total profit. It is seen that most of the investment decisions

appear either in the beginning or at the end of a plan sub-period so as to utilize the available budget


One noticeable difference of the optimal plan, of the base case, arrived in this Chapter with that in

Chapter-2 is the complete absence of coal-based generation addition when discrete unit sizes are



Year of Installation Gas-Fired (MW) Coal-Fired (MW) Combine-Cycle (MW)

1 0 0 200

5 0 0 200

9 100 0 200

11 100 0 200

Table X summarizes the present value of the financial balance of the firm in the base case solution

with discrete size of units coming during plan period, where the firm yields an IRR* of 45.1%. The

total present value of its profit over the planning horizon is 287.69 M$.

There is a noticeable increase in IRR when discrete unit sizes are considered in this Chapter, as

compared to the results in Chapter-2. The justification for this increase is the higher allowable budget

in the present Chapter, resulting in more investments, and large capacity unit additions because of

specified discrete unit sizes of 100 MW, 200 MW and 300 MW only.


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