2214 IEEE TRANSACTIONS ON POWER SYSTEMS, VOL. 26, NO. 4, NOVEMBER 2011 Generation Expansion Planning in the Age of Green Economy Francesco Careri, Student Member, IEEE, Camillo Genesi, Member, IEEE, Paolo Marannino, Fellow, IEEE, Mario Montagna, Stefano Rossi, Student Member, IEEE, and Ilaria Siviero, Member, IEEE Abstract—Generation expansion planning (GEP) is the problem of finding the optimal strategy to plan the construction of new generation plants while satisfying technical and economical con- straints. It is a challenging problem due to its nonlinearity, large- scale, and to the discrete nature of the variables describing unit size and allocation. Originally, GEP was faced by vertically integrated utilities with the aim of minimizing production and capital costs. After deregulation, generation companies were forced to consider GEP from the viewpoint of market shares and financial risk. In recent years, increasing concern for environmental protection has driven lots of countries all over the world to promote energy gen- eration from renewable sources. Different incentive systems have been introduced to support the growth of the investments in gen- eration plants exploiting renewable energy. In the present paper, the impact of some of the most popular incentive systems (namely feed-in tariffs, quota obligation, emission trade, and carbon tax) on generation planning is considered, thus obtaining a comprehensive GEP model with a suitably modified objective function and addi- tional constraints. The resulting problem is solved by resorting to the generalized Benders decomposition (GBD) approach and im- plemented in the Matlab programming language. Tests are pre- sented with reference to the Italian system. Index Terms—Generalized Benders decomposition, green economy incentives, power generation planning. NOMENCLATURE A. Indices Index corresponding to years of the planning horizon. Index corresponding to a generation technology available for planning. B. Constants Number of years of the planning horizon. Discount rate. Average energy price ( /MWh) in the th year. Manuscript received July 22, 2010; revised September 02, 2010, October 22, 2010, and December 16, 2010; accepted January 13, 2011. Date of publication February 24, 2011; date of current version October 21, 2011. Paper no. TPWRS- 00589-2010. The authors are with the Department of Electrical Engineering, University of Pavia, 27100 Pavia, Italy (e-mail: francesco.careri@unipv.it; camillo. genesi@unipv.it; paolo.marannino@unipv.it; mario.montagna@unipv.it; stefano.rossi01@unipv.it; ilaria.siviero@unipv.it). Digital Object Identifier 10.1109/TPWRS.2011.2107753 Price of the ( /t) emission right in the th year. Price of the green certificate ( /MWh) in the th year. Generation cost ( /MWh) for technology . Feed-in tariff ( /MWh) for technology in the th year. Investment cost ( /MW) for the installation of a generation unit of technology in the th year. Coefficient for assigning the green certificates to the renewable technology corresponding to 1-MWh generation. Percentage of the nonrenewable energy produced that must be balanced by green certificates in the th year. emission coefficient (t/MWh) for technology corresponding to 1-MWh generation. emission allowance (t) assigned for the th year. Maximum energy (MWh) that can be produced in the th year by the set of units already installed in the year 0, belonging to technology . Maximum number of units that can be installed for technology . Rated power (MW) of a generation unit based on technology . Utilization hours per year, corresponding to technology . C. Variables Energy (MWh) sold in the th year (with upper and lower bounds , ). Energy (MWh) produced by existing units of technology in the th year. Energy (MWh) produced by new units of technology in the th year. 0885-8950/$26.00 © 2011 IEEE