Optimal timing for generation investment with uncertain emission mitigation policy

SUMMARY In view of the fact that different mechanisms for mitigating the CO 2 emission have been employed or proposed in different countries or regions, and those already implemented are still in an evolutionary procedure, the future CO 2 emission prices would be highly uncertain. Given this background, an effort is made for investigating the problem of generation investment decision-making in electricity market environment with uncertainties from the climate change policy for limiting the CO 2 emission. According to the changing characteristics of the uncertain factors, the models of the fuel prices, electricity prices, and CO 2 emission prices are respectively presented first. Next, under the existing real option approach (ROA) based methodological framework for the generation investment decision-making problem, a mathematical model accommodating multiple kinds of uncertainties and an efficient solving method are developed. Finally, the proposed model and method are illustrated by a numerical example with different scenarios