The envisaged decarbonization of electricity systems
has attracted significant inte
rest around the role and value of
demand flexibility
.
However, the impact of this flexibility on
generation investments in the deregulated
electricity industry
setting remains a largely unexplored area, since previous
relevant work
neglects
the time
-
coupli
ng nature of demand
shifting potentials.
This paper addresses this challenge by
proposing a strategic generation investment planning model
expressing the decision making process of a
self
-
interested
generation company and accounting for the time
-
coupling
o
perational characteristics of demand flexibility. This model is
formulated as a multi
-
period bi
-
level optimization problem,
which is solved after converting it to a Mathematical Program
with Equilibrium Constraints (MPEC).
Case studies with the
proposed
mo
del
demonstrate that demand flexibility reduces the
total generation capacity investment, enhances investments in
baseload generation and yield
s
significant economic benefits in
terms of total system costs and demand payments.