Concepedia

A model for integrated analysis of generation capacity expansion and financial planning

Saumen Majumdar, Debabrata Chattopadhyay

IEEE Transactions on Power Systems · 1999 · 45 citations · 9 references

TL;DR

Electricity generation capacity planning requires an integrated analysis of investment and financing decisions, a need highlighted for utilities operating in competitive markets. The authors formulate and implement an integrated investment‑finance mathematical programming model for power systems, extending traditional capacity‑planning models to jointly optimize investment and financing decisions in a case study. Implementation of the model demonstrates that financing and investment decisions interact significantly, underscoring the necessity of accounting for these interactions in capacity‑planning optimization.

Abstract

This paper discusses the need for an integrated analysis of investment and financing decisions in the context of electricity generation capacity addition planning. The traditional mathematical programming model for investment planning and its potential enhancement to encompass financing decisions in a unified framework have been discussed. The integrated investment-finance model for a power system is formulated. The model is implemented for a well-known investment planning case study and the various investment-financing interactions have been discussed. The results indicate that the interaction of financing and investment decisions could be very significant and needs to be accounted for in capacity planning optimization exercises. This is particularly relevant for utilities in a competitive environment.