Uncertainty and investment in electricity generation with an application to the case of Hydro-Québec

The electricity industry is undergoing a substantial process of restructuring, with an emphasis on the introduction of competition in the generation sector. Traditional planning methods are not necessarily appropriate for this new environment. This paper extends a previously developed linear programming model to the problem of optimal expansion planning in the face of uncertainty. The model explicitly accounts for equipment availability and load duration curves in selecting optimal investment. The use of the model is illustrated with a simple 2-region problem calibrated with data from Hydro-Québec and the northeastern United States that suggests how the LP model can help decision makers.