Balancing risk: Generation expansion planning under climate mitigation scenarios

Abstract

In today’s world, it is important to make sound decisions on generation expansion planning (GEP) for sustainable growth as well as climate risk mitigation. In particular, constraints on carbon emissions reduction have become imperative for various jurisdictions around the world. The challenge is that energy sources have different risk profiles in terms of supply uncertainties, operational (in-)flexibilities, high/low carbon emission rates, rare but extreme accident costs, etc. In this work, we propose a novel model for optimal expansion planning to incorporate this heterogeneity. Trade-offs occur due to different characteristics of energy sources. We study optimal long-term capacity expansion planning while achieving carbon emissions reduction targets. This is accomplished under different risk measures such as mean and value-at-risk. Numerical experiments are conducted based on the data of South Korea, from which we observe notable and combined effects of operational flexibility, emissions reduction, and extremal risks.