Generation capacity expansion in liberalized electricity markets: A stochastic MPEC approach

Sonja Wogrin*, Efraim Centeno, Julián Barquín

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper proposes a bilevel model to assist a generation company in making its long-term generation capacity investment decisions considering uncertainty regarding the investments of the other generation companies. The bilevel formulation allows for the uncoupling of investment and generation decisions, as investment decisions of the single investing generation company are taken in the upper level with the objective to maximize expected profits and generation decisions by all companies are considered in the lower level. The lower level represents the oligopolistic market equilibrium via a conjectured-price response formulation, which can capture various degrees of strategic market behavior like perfect competition, the Cournot oligopoly, and intermediate cases. The bilevel model is formulated as an MPEC, replacing the lower level by its KKT conditions and transformed into a MILP. Results from a study case are presented and discussed.

Original languageEnglish
Article number5764851
Pages (from-to)2526-2532
Number of pages7
JournalIEEE Transactions on Power Systems
Issue number4
Publication statusPublished - Nov 2011
Externally publishedYes


  • Bilevel programming
  • generation expansion planning
  • mathematical program with equilibrium constraints (MPEC)

ASJC Scopus subject areas

  • Energy Engineering and Power Technology
  • Electrical and Electronic Engineering

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