Strategic Generation Investment Using a Complementarity Approach

Jalal Kazempour, Antonio J. Conejo, Carlos Ruiz

Research output: Contribution to journalJournal articleResearchpeer-review


This paper provides a methodology to assist a strategic producer in making informed decisions on generation investment. A single target year is considered with demand variations modeled through blocks. The strategic behavior of the producer is represented through a bilevel model: the upper-level considers both investment decisions and strategic production actions and the lower-level corresponds to market clearing. Prices are obtained as dual variables of power balance equations. Rival uncertainties (on offering and investment) are characterized through scenarios. The resulting model is a large-scale mixed-integer LP problem solvable using currently available branch-and-cut techniques. Results pertaining to an illustrative example and a case study are reported and discussed.
Original languageEnglish
JournalIEEE Transactions on Power Systems
Issue number2
Pages (from-to)940-948
Number of pages9
Publication statusPublished - 2011
Externally publishedYes


  • Electrical and Electronic Engineering
  • Energy Engineering and Power Technology
  • Generation investment
  • mathematical program with equilibrium constraints (MPEC)
  • strategic producer
  • uncertainty
  • Bilevel
  • Branch-and-cut techniques
  • Demand variations
  • Illustrative examples
  • Informed decision
  • Investment decisions
  • LP problem
  • Market clearing
  • Mathematical program with equilibrium constraints
  • Mixed-integer
  • Power balance equations
  • Strategic Behavior
  • Investments
  • power markets
  • integer programming
  • investment
  • linear programming
  • branch-and-cut techniques
  • strategic generation investment
  • investment decisions
  • market clearing
  • power balance equations
  • rival uncertainties
  • large-scale mixed-integer LP problem
  • Mathematical model
  • Production
  • Uncertainty
  • Planning
  • Stochastic processes
  • Optimization
  • Power system management, operation and economics
  • Optimisation techniques


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