Generation expansion planning with renewable energy credit markets: A bilevel programming approach

Abstract This paper presents a novel generation expansion planning (GEP) problem that integrates the renewable energy market to power system operations. We consider the gaining prominence for renewable energy credits (REC) used to implement renewable portfolio standards, a politically popular policy employed in many US states. The overall problem is formulated as a bilevel optimization where the offering prices, supplies, and demands in the REC markets are considered as functions of power system optimal operations. The problem is solved effectively by the proposed combination of the Karush-Kuhn-Tucker (KKT) reformulation method and the fixed point iterative algorithm. Key findings on the impacts of renewable energy policies on GEP solutions such as the merit order effect, the changes of retail electricity prices, and the RPS dilution, which are consistent with observations, are presented. Our model provides an effective framework for evaluating the long-term impacts of renewable energy policies.