Generation Capacity Expansion in a Risky Environment: A Stochastic Equilibrium Analysis

Andreas Ehrenmann
Andreas Ehrenmann
[email protected]
GDF SUEZ, Center of Expertise in Economic Modeling and Studies (CEEMS), 1000 Brussels, Belgium
Search for more papers by this author
,
Yves Smeers
Yves Smeers
[email protected]
Center for Operations Research and Econometrics (CORE) and Department of Mathematical Engineering (INMA), Université Catholique de Louvain, 1348 Louvain-la-Neuve, Belgium
Search for more papers by this author

GDF SUEZ, Center of Expertise in Economic Modeling and Studies (CEEMS), 1000 Brussels, Belgium

Center for Operations Research and Econometrics (CORE) and Department of Mathematical Engineering (INMA), Université Catholique de Louvain, 1348 Louvain-la-Neuve, Belgium

Search for more papers by this author

Published Online:1 Dec 2011https://doi.org/10.1287/opre.1110.0992

Supplemental Material

opre.1110.0992-sm-ec.pdf (190 KB)

Cited by
- Taxing emissions and de-risking investments in renewables: Insights from electricity markets
  European Journal of Operational Research, Vol. 165
- When Market Incompleteness Is Preferable to Market Power: Insights from Power Markets
  Ibrahim Abada,
  Andreas Ehrenmann
  22 September 2025 | Operations Research, Vol. 74, No. 2
- Missing Risk Markets and Capacity Remuneration Mechanisms in Electricity-Hydrogen Systems
  IEEE Transactions on Energy Markets, Policy and Regulation, Vol. 4, No. 1
- Variational Methods for Equilibrium Problems Applied to Electricity Markets
  1 October 2025 | Journal of Optimization Theory and Applications, Vol. 208, No. 1
- Capacity markets vs. “energy only” markets with improved scarcity pricing under increasing wind penetration
  Renewable Energy Focus, Vol. 55
- The insurance value of renewable energies
  Energy Economics, Vol. 148
- On the valuation of legacy power production in liberalized markets via option-pricing
  European Journal of Operational Research, Vol. 322, No. 3
- Risk-sharing in energy communities
  European Journal of Operational Research, Vol. 322, No. 3
- Stochastic Capacity Expansion Model Accounting for Uncertainties in Fuel Prices, Renewable Generation, and Demand
  6 March 2025 | Energies, Vol. 18, No. 5
- A Mean Field Game Model for Renewable Investment Under Long-Term Uncertainty and Risk Aversion
  2 March 2024 | Dynamic Games and Applications, Vol. 14, No. 5
- Consequences of the missing risk market problem for power system emissions
  Energy Economics, Vol. 136
- Long-term issues with the Energy-Only Market design in the context of deep decarbonization
  Energy Economics, Vol. 132
- A Comparative Study of Capacity Market Demand Curve Designs Considering Risk-Averse Market Participants
  IEEE Transactions on Energy Markets, Policy and Regulation, Vol. 1, No. 4
- Financial Risk and Resource Adequacy in Markets With High Renewable Penetration
  IEEE Transactions on Energy Markets, Policy and Regulation, Vol. 1, No. 4
- Capacity expansion in liberalized electricity markets with locational pricing and renewable energy investments
  Energy Economics, Vol. 127
- Risk aversion and flexibility options in electricity markets
  Energy Economics, Vol. 126
- Beyond capacity: Contractual form in electricity reliability obligations
  Energy Economics, Vol. 126
- An Examination of Households’ Attitudes towards Renewable Energy Source Investments in Lower Silesian Voivodeship
  15 October 2023 | Energies, Vol. 16, No. 20
- Coal-Biomass Co-firing within Renewable Portfolio Standards: Strategic Adoption by Heterogeneous Firms and Emissions Implications
  1 September 2023 | The Energy Journal, Vol. 44, No. 5
- Stochastic equilibria with capacity expansion: Increasing expected profit with risk aversion
  Decision Analytics Journal, Vol. 7
- Exploring the impact of boundedly rational power plant investment decision-making by applying prospect theory
  Utilities Policy, Vol. 82
- On the Role of Risk Aversion and Market Design in Capacity Expansion Planning
  1 May 2023 | The Energy Journal, Vol. 44, No. 3
- When Market Incompleteness Is Preferable to Market Power: Insights from Power Markets
  1 January 2023 | SSRN Electronic Journal, Vol. 39
- Risk-sharing in Energy Communities
  1 January 2023 | SSRN Electronic Journal, Vol. 165
- Why the sustainable provision of low-carbon electricity needs hybrid markets
  Energy Policy, Vol. 171
- Robust market equilibria under uncertain cost
  European Journal of Operational Research, Vol. 302, No. 3
- Should Electricity Market Designs be Improved to Drive Decarbonization?
  14 October 2022 | , Vol. 129
- Comparative analysis of risk-aversion and strategic investment behavior in generation expansion
  Electric Power Systems Research, Vol. 210
- Carbon contracts-for-difference: How to de-risk innovative investments for a low-carbon industry?
  iScience, Vol. 25, No. 8
- Generation expansion planning with revenue adequacy constraints
  Computers & Operations Research, Vol. 142
- Why do Energy Markets in Europe Rely on One Instrument?
  1 April 2022 | Production and Operations Management, Vol. 31, No. 4
- An analysis of zonal electricity pricing from a long-term perspective
  Energy Economics, Vol. 107
- Private risk and social resilience in liberalized electricity markets
  Joule, Vol. 6, No. 2
- Risk aversion in multilevel electricity market models with different congestion pricing regimes
  Energy Economics, Vol. 105
- Electricity Markets under Deep Decarbonization
  SSRN Electronic Journal, Vol. 4
- On the Valuation of Legacy Power Production in Liberalized Markets via Option-Pricing
  SSRN Electronic Journal, Vol. 165
- Modeling world oil market questions: An economic perspective
  Energy Policy, Vol. 159
- Information shocks and profitability risks for power plant investments – impacts of policy instruments
  Energy Economics, Vol. 102
- Impact of capacity mechanisms and demand elasticity on generation adequacy with risk-averse generation companies
  Electric Power Systems Research, Vol. 199
- Joint energy and capacity equilibrium model for centralized and behind-the-meter distributed generation
  International Journal of Electrical Power & Energy Systems, Vol. 131
- Contracts in electricity markets under EU ETS: A stochastic programming approach
  Energy Economics, Vol. 99
- Analysis of futures and spot electricity markets under risk aversion
  European Journal of Operational Research, Vol. 291, No. 3
- A two stage cap-and-trade model with allowance re-trading and capacity investment: The case of the Chilean NDC targets
  Energy, Vol. 224
- Economizing the Uneconomic: Markets for Reliable, Sustainable, and Price Efficient Electricity
  9 April 2021 | Sustainability, Vol. 13, No. 8
- Two-Stage Stochastic Variational Inequalities: Theory, Algorithms and Applications
  12 October 2019 | Journal of the Operations Research Society of China, Vol. 9, No. 1
- Risk Trading in Energy Communities
  IEEE Transactions on Smart Grid, Vol. 12, No. 2
- Strictly and Γ-robust counterparts of electricity market models: Perfect competition and Nash–Cournot equilibria
  Operations Research Perspectives, Vol. 8
- Facilitating power markets integration: A cooperative game with externalities approach
  SSRN Electronic Journal, Vol. 46
- Comparative Analysis of Risk-Aversion and Strategic Investment Behavior in Generation Expansion
  SSRN Electronic Journal, Vol. 199
- Uncertain bidding zone configurations: The role of expectations for transmission and generation capacity expansion
  European Journal of Operational Research, Vol. 285, No. 1
- A parametric programming approach to bilevel optimisation with lower-level variables in the upper level
  29 May 2019 | Journal of the Operational Research Society, Vol. 71, No. 5
- On Synchronous, Asynchronous, and Randomized Best-Response Schemes for Stochastic Nash Games
  Jinlong Lei,
  Uday V. Shanbhag,
  Jong-Shi Pang,
  Suvrajeet Sen
  25 October 2019 | Mathematics of Operations Research, Vol. 45, No. 1
- The impact of short-term variability and uncertainty on long-term power planning
  19 November 2018 | Annals of Operations Research, Vol. 284, No. 1
- Risk averse investment strategies for a private electricity generating company in a carbon constrained environment
  12 April 2019 | Journal of the Operational Research Society, Vol. 70, No. 12
- Clustering representative days for power systems generation expansion planning: Capturing the effects of variable renewables and energy storage
  Applied Energy, Vol. 253
- Asymmetric risk and fuel neutrality in electricity capacity markets
  28 October 2019 | Nature Energy, Vol. 4, No. 11
- Electric Power Industry: Operational and Public Policy Challenges and Opportunities
  1 November 2019 | Production and Operations Management, Vol. 28, No. 11
- Spillover effects of distribution grid tariffs in the internal electricity market: An argument for harmonization?
  Energy Economics, Vol. 84
- A survey on electricity market design: Insights from theory and real-world implementations of capacity remuneration mechanisms
  Energy Economics, Vol. 80
- To expand or not to expand: A strategic analysis of the recycler's waste treatment capacity
  Computers & Industrial Engineering, Vol. 130
- Optimal sales-mix and generation plan in a two-stage electricity market
  Energy Economics, Vol. 78
- Spillover Effects of Distribution Grid Tariffs in the Internal Electricity Market: An Argument for Harmonization?
  SSRN Electronic Journal, Vol. 210
- Asymmetric Risk and Fuel Neutrality in Capacity Markets
  SSRN Electronic Journal, Vol. 165
- The impact of policy measures on future power generation portfolio and infrastructure: a combined electricity and CCTS investment and dispatch model (ELCO)
  26 June 2017 | Energy Systems, Vol. 9, No. 4
- Uniqueness and multiplicity of market equilibria on DC power flow networks
  European Journal of Operational Research, Vol. 271, No. 1
- Performance-based contract design under cost uncertainty: A scenario-based bilevel programming approach
  11 June 2018 | The Engineering Economist, Vol. 63, No. 4
- An ADMM-Based Method for Computing Risk-Averse Equilibrium in Capacity Markets
  IEEE Transactions on Power Systems, Vol. 33, No. 5
- Reliability with interdependent suppliers
  European Journal of Operational Research, Vol. 268, No. 1
- Renewable generation expansion under different support schemes: A stochastic equilibrium approach
  European Journal of Operational Research, Vol. 266, No. 3
- A spatial electricity market model for the power system: The Kazakhstan case study
  Energy, Vol. 149
- Robustness of capacity markets: a stochastic dynamic capacity investment model
  31 January 2018 | OR Spectrum, Vol. 40, No. 2
- How do demand response and electrical energy storage affect (the need for) a capacity market?
  Applied Energy, Vol. 214
- Retail consumers and risk in centralized energy auctions for indexed long-term contracts in Chile
  Energy Policy, Vol. 114
- On risk averse competitive equilibrium
  Operations Research Letters, Vol. 46, No. 1
- Hedging Strategies: Electricity Investment Decisions under Policy Uncertainty
  1 January 2018 | The Energy Journal, Vol. 39, No. 1
- An analysis of a forward capacity market with long-term contracts
  Energy Policy, Vol. 111
- A randomized inexact proximal best-response scheme for potential stochastic nash games
- Electric vehicle charging
  11 October 2017 | ACM SIGMETRICS Performance Evaluation Review, Vol. 45, No. 2
- The effectiveness of capacity markets in the presence of a high portfolio share of renewable energy sources
  Utilities Policy, Vol. 48
- Two-stage non-cooperative games with risk-averse players
  29 April 2017 | Mathematical Programming, Vol. 165, No. 1
- On the multiplicity of solutions in generation capacity investment models with incomplete markets: a risk-averse stochastic equilibrium approach
  30 August 2017 | Mathematical Programming, Vol. 165, No. 1
- Uniqueness of market equilibrium on a network: A peak-load pricing approach
  European Journal of Operational Research, Vol. 261, No. 3
- Modeling Gas Markets with Endogenous Long-Term Contracts
  Ibrahim Abada,
  Andreas Ehrenmann,
  Yves Smeers
  2 June 2017 | Operations Research, Vol. 65, No. 4
- Electricity markets for energy, flexibility and availability — Impact of capacity mechanisms on the remuneration of generation technologies
  Energy Economics, Vol. 66
- RES-E capacity investment under uncertain renewable energy supply and volatile electricity spot price
  Industrial Management & Data Systems, Vol. 117, No. 6
- Electricity market short‐term risk management via risk‐adjusted probability measures
  28 June 2017 | IET Generation, Transmission & Distribution, Vol. 11, No. 10
- Investment with incomplete markets for risk: The need for long-term contracts
  Energy Policy, Vol. 105
- Differentiability Conditions for Stochastic Hybrid Systems with Application to the Optimal Design of Microgrids
  13 March 2017 | Journal of Optimization Theory and Applications, Vol. 173, No. 2
- Does risk aversion affect transmission and generation planning? A Western North America case study
  Energy Economics, Vol. 64
- Investment and generation optimization in electricity systems with intermittent supply
  20 May 2016 | Energy Systems, Vol. 8, No. 1
- Does Risk Aversion Affect Transmission and Generation Planning? A Western North America Case Study
  SSRN Electronic Journal, Vol. 25
- Assessing the economic value of co-optimized grid-scale energy storage investments in supporting high renewable portfolio standards
  Applied Energy, Vol. 183
- Perfectly competitive capacity expansion games with risk-averse participants
  19 October 2015 | Computational Optimization and Applications, Vol. 65, No. 2
- Investment risks in power generation: A comparison of fossil fuel and renewable energy dominated markets
  Energy Economics, Vol. 58
- Meta-analysis of energy scenario studies: Example of electricity scenarios for Switzerland
  Energy, Vol. 109
- Equilibrium, uncertainty and risk in hydro-thermal electricity systems
  30 January 2016 | Mathematical Programming, Vol. 157, No. 2
- An approximation scheme for a class of risk-averse stochastic equilibrium problems
  23 February 2016 | Mathematical Programming, Vol. 157, No. 2
- Capacity expansion of stochastic power generation under two-stage electricity markets
  Computers & Operations Research, Vol. 70
- A review of policy analysis purpose and capabilities of electricity system models
  Renewable and Sustainable Energy Reviews, Vol. 59
- Influence of non-harmonized capacity mechanisms in an interconnected power system on generation adequacy
- Development of a Stochastic Model for Wind Power Production
  Korean Management Science Review, Vol. 33, No. 1
- Two-stage stochastic mixed integer optimization models for power generation capacity expansion with risk measures
  13 November 2015 | Optimization Methods and Software, Vol. 31, No. 2
- Capacity market design options: A dynamic capacity investment model and a GB case study
  European Journal of Operational Research, Vol. 249, No. 2
- Impact of forecast errors on expansion planning of power systems with a renewables target
  European Journal of Operational Research, Vol. 248, No. 3
- Investment in Production Capacity
  11 June 2016
- Capacity payment impact on gas-fired generation investments under rising renewable feed-in — A real options analysis
  Energy Economics, Vol. 53
- Cleaner power generation through market-driven generation expansion planning: an agent-based hybrid framework of game theory and Particle Swarm Optimization
  Journal of Cleaner Production, Vol. 105
- Hydro resource management, risk aversion and equilibrium in an incomplete electricity market setting
  Energy Economics, Vol. 51
- Risk Trading and Endogenous Probabilities in Investment Equilibria
  SIAM Journal on Optimization, Vol. 25, No. 4
- Meta-Analysis of Energy Scenario Studies: Example of Electricity Scenarios for Switzerland
  SSRN Electronic Journal, Vol. 21
- Risk Aversion and Technology Portfolios
  28 March 2014 | Review of Industrial Organization, Vol. 44, No. 4
- An electricity market model with generation capacity expansion under uncertainty
  15 December 2013 | Energy Systems, Vol. 5, No. 2
- Analysing the generation adequacy in power markets with renewable energy sources
- Medium range optimization of copper extraction planning under uncertainty in future copper prices
  European Journal of Operational Research, Vol. 233, No. 3
- Capacity expansion and forward contracting in a duopolistic power sector
  27 March 2013 | Computational Management Science, Vol. 11, No. 1-2
- Technology selection and capacity investment under uncertainty
  European Journal of Operational Research, Vol. 232, No. 1
- Risk aversion and technology mix in an electricity market
  Energy Economics, Vol. 40
- Risk adjusted discounted cash flows in capacity expansion models
  26 July 2013 | Mathematical Programming, Vol. 140, No. 2
- Market power in renewable portfolio standards
  Energy Economics, Vol. 39
- Generation Investment Equilibria With Strategic Producers—Part I: Formulation
  IEEE Transactions on Power Systems, Vol. 28, No. 3
- Stochastic optimization models for power generation capacity expansion with risk management
- Financing investment in new electricity generation capacity: The impact of a German capacity market on Northwest Europe
- Complementarity and Game-Theoretical Models for Equilibria in Energy Markets: Deterministic and Risk-Averse Formulations
  1 November 2013
- Capacity Payment Impact on Gas-Fired Generation Investments under Rising Renewable Feed-In -- A Real Options Analysis
  SSRN Electronic Journal, Vol. 14
- Generation Capacity Investments in Electricity Markets: Perfect Competition
  SSRN Electronic Journal, Vol. 49
- Demand response in Indian electricity market
  Energy Policy, Vol. 50
- Stochastic Equilibrium Models for Generation Capacity Expansion
  25 July 2011

Volume 59, Issue 6

November-December 2011

Pages iii-1561

Article Information

Supplemental Material

Metrics

Information

Received:February 01, 2008
Accepted:August 01, 2010
Published Online:December 01, 2011

Cite as

Andreas Ehrenmann, Yves Smeers, (2011) Generation Capacity Expansion in a Risky Environment: A Stochastic Equilibrium Analysis. Operations Research 59(6):1332-1346.

https://doi.org/10.1287/opre.1110.0992

Keywords

PDF download

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Generation Capacity Expansion in a Risky Environment: A Stochastic Equilibrium Analysis

Supplemental Material

Volume 59, Issue 6

Article Information

Supplemental Material

Metrics

Information

Cite as

Keywords

Sign Up for INFORMS Publications Updates and News