Bi-level model for generation expansion planning with contract pricing of renewable energy in the presence of energy storage

This study presents a bi-level model for expansion planning of generation systems. The proposed model endogenously determines the incentive to invest (guaranteed purchase contract) for wind and storage units. In the upper level of the proposed model, wind turbines and compressed air storage systems focus on maximising their profits by presenting a strategic offering, while at the lower level, there is an independent system operator with the purpose of increasing social welfare run the market clearing equations. In solving the bi-level model, the Karush–Kuhn–Tucker conditions are used to develop the mathematical program with equilibrium constraints. The problem was first linearised and then solved by GAMS software. The outputs of this problem are the installation time and capacity of the wind and storage units and the price of the purchase contract. The obtained results were compared with other existing studies for verification purposes.