A Bilevel Model for Generation Expansion Planning with Contract Pricing of Renewable Energy

In this paper, a novel framework is presented to solve generation expansion planning problem in the presence of investment incentives. In the proposed model, investment incentive is a guaranteed purchase contract. Generation expansion planning is presented as a bilevel model, where the goal of upper level is maximizing profit of wind unit investor and the low level includes the market clearing optimization problem with maximizing of social welfare powered by independent system operator (ISO). This bilevel problem is transformed into an mathematical programming with equilibrium constraints problem (MPEC) using the KKT conditions. In this paper, the guaranteed contract price and the market price are obtained in the market clearing equations, and by using them and the strategic bidding by wind unit, it is decided on investment.