2014 IEEE International Conference on Intelligent Energy and Power Systems (IEPS)
Generation Expansion Planning Considering
Externalities for Large Scale Integration of
Renewable Energy
Akif Zia Khan, Sun Yingyun, Ahsan Ashfaq
State Key Laboratory of Alternate Electric Power System
North China Electric Power University
Beijing, China
akifziakhan@hotmail.com,{sunyingyun,ahsan.skyhigh}@gmail.com
Abstract — Generation expansion planning (GEP) problem
involves determining new power plants in terms of type, capacity
and allocation for meeting future load demands. The GEP
problem incorporates large number of constraints and it is a
highly complex, large scale, non linear optimization problem.
Large scale integration of Renewable Energy systems (RES) in
GEP problem has always been averted by the high cost and poor
availability rates of RES as compared to conventional fossil fuel
fired power plants.However internalizing environmental
externalities in GEP problem could help to promote large scale
integration of RES. The proposed model in this paper examines
the effect of internalizing externalities on the GEP problem.
External cost values for china are evaluated using the unit
damage costs of pollutants. The model has been implemented in
MATLAB using Genetic Algorithm and is applied to a case study
of one of the district power companies of China. The results show
significant structural changes in favor of RES confirming that
internalizing externalities can be used as a driving policy tool for
large scale integration of RES.
Keywords— Generation Expansion Planning (GEP);Renewable
Energy Systems(RES);External Cost of Energy,Genetic
Algorithm(GA),Greenhouse Gas(GHG)
NOMENCLATURE
A. Indices
i Index representing the type of generation technology
available in the planning horizon
j Index representing the type of pollutant considered in
the planning horizon
t Index representing years of the planning horizon
B. Sets
N Set consisting of new power plants
E Set consisting of existing power plants
PO Set consisting of all the pollutants
C. Variable
Number of unit type i required in year t. Its discrete
decision variable and 1 means unit capacity
978-1-4799-2266-6/14/$31.00 ©2014 IEEE 135
D.Constants
T Number of years in planning horizon
Capacity of new power plant of type i (MW)
Capacity of existing power plant of type i (MW)
Capacity Factor of unit type i of new power plants
Capacity Factor of unit type i of existing power
plants
Average annual utilization hours of unit type i of new
power plants
Average annual utilization hours of unit type i of
existing power plants
Pollutant of type j emitted per unit of energy
produced by new power plant of type i
Pollutant of type j emitted per unit of energy
produced by existing power plant of type i
Efficiency of new power plant of type i
Efficiency of existing power plant of type i
Peak Load in year t
Utilization hours of load in year t
Availability rate of the new generation unit at peak
load
Availability rate of the existing generation unit at
peak load
Spinning reserves requirement of the system in year t
E. Cost Parameters
Investment cost ($/MWh) of unit type i in year t
Fuel Cost ($/MWh) for unit type i of new power
plants in year t
Fuel Cost ($/MWh) for unit type i of existing power
plants in year t
The operation and maintenance cost ($/MWh) for
unit type i of new power plants in year t
The operation and maintenance cost ($/MWh) for
unit type i of existing power plants in year t
Unit damage cost ($/tons) of pollutant j emitted by
new power plant i in year t
 2014 IEEE International Conference on Intelligent Energy and Power Systems (IEPS)
Unit damage cost ($/tons) of pollutant j emitted by
existing power plant i in year t
External Cost per unit of energy produced by new
RES
External Cost per unit of energy produced by existing
RES
I. INTRODUCTION
China is making progress at a rapid pace. With the
continuous industrialization, growth in GDP and increasing
export demands, China’s electricity industry needs to foster to
play a pivotal role in the economic development of the country.
By the end of 2012, China’s total installed capacity amounted
to 1,144.9 GW [1]. The contribution of different types of
generation technologies is presented in Table 1.
Coal has a considerable contribution in China’s power
generation sector. The reason of relying heavily on coal for
power production in China is its prodigious abundance and low
price. However, it produces large quantities of Greenhouse
gases when burnt and poses serious threat to the environment
and human health.
Because of the vital contribution of coal fired power plants
in the electricity sector, China has now become the biggest
emitter of CO2 in the world with emissions reaching to 8000
million tons in 2011 out of which 4011 million tons of emission
were only from electricity and heat production sector [2].These
emissions are causing serious environmental and health
problems including poor quality of air, respiratory problems
and increased number of hospital admissions. It has been a
stance of many analysts that GHG emissions of China must be
controlled in order to avoid any catastrophic climate change
. All these reasons suggest that China should begin
considering large scale integration of RES in GEP process that
makes it possible to reduce the environmental impact of
burning coal in power plants. Another reason that fascinates
large scale integration of RES is that China has substantial
potential of RES and it shows the possibility for RES to
contribute a significant portion in the future energy demands.
However, renewable energy is currently under-exploited in
China compared with the potential [3].
Reference [3] suggested that China’s RES are rich enough
to meet the country’s anticipated load demands and evaluated
the perspective of 100% RES in China. However the biggest
barrier that averts the large scale integration of RES is related
to its high cost as compared to the conventional fossil fuel
fired power plants. The experience curve analysis show that
chances of cost reduction for RES is more as compared to
conventional fossil fuel fired power plants with cumulative
production as in [4]. But still many analysts maintain that RES
wouldn’t be able to compete with conventional energy
technologies for a long time as in [5]. Reference [6] considered
integration of RES in GEP problem for China but the result of
the study showed that RES were incomparable to conventional
energy technologies in terms of economy.
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Table 1 Contribution of different generation technologies
Type of Power Plants Installed Capacity (GW)
Coal 758
Hydro 248.9
Gas 38.27
Nuclear 12.57
Wind 60.83
Solar 3.28
References [7, 8] also considered RES in GEP problem but
all these studies were suited for small scale integration of RES.
All these studies didn’t take environmental externalities into
account. External costs make a large portion of total social
costs linked with conventional energy technologies however
this cost is negligible for RES as discussed in [5].Consideration
of External Cost in the GEP problem can help to evaluate RES
and conventional energy technologies on an equal basis both
economically and environmentally and it will help to promote
large scale integration of RES in GEP problem. This paper
evaluates the impact of internalizing external costs in the GEP
problem and examines its effect on the structural changes of
electricity generation in one of the district power companies of
China.
The paper proceeds as follow. Section II discusses the
external cost of energy. Section III presents the mathematical
model. Application of evolutionary based GA to solve the
model is discussed in section IV. Section V contains results
and discussions. Section VI summarizes and concludes the
paper.
II. EXTERNAL COST OF ENERGY
A. Overview of External Cost
External cost is linked with the impact of pollutants
emitted from the generating unit upon the environment and
human health. Some literatures refer to external cost as
Externality as in [9]. When the socio-economic activities of
one group of people causes an impact on another group of
people, external cost arises. This cost is not considered and
compensated by the first group of people. For example, a
generation facility that emits airborne pollutants in the
surrounding atmosphere poses an external cost to the society
because the impact of pollution on the receptor is not
considered by the owner of generation facility. External costs
makes a significant portion of total social costs for
conventional energy technologies however its values lies in a
relatively smaller range for RES.
B. Consideration of External Cost in GEP problem
Reference [10] stated external costs as those linked with
the impact of the pollutants released by GENCO’s to the
environment. Reference [11] laid stress on the fact that external
cost cannot be ignored in the GEP process. Internalization of
external cost in GEP problem is done on the basis of
quantization of externalities. Quantization of externalities was
first done in the series of European Commission ExternE
 2014 IEEE International Conference on Intelligent Energy and Power Systems (IEPS)
projects. The results of ExternE projects were further improved For RES, external cost is charged per unit of energy
within NEEDS [12, 13]. produced. Per Unit external cost of energy for RES is derived
from [15] and is presented in Table 3.
Reference [14] used the results of ExternE project and
modified MARKAL model to study the impacts of Table 2 Unit damage cost of different pollutants for China
internalizing externalities on GEP problem in Vietnam. Effects
Pollutant SO2 NOX PM CO2
of internalizing externalities on GEP problem in Israel using
WASP-IV model was studied in [9]. Unit damage Cost
3680.4 2438.25 2624.5 50
(US$ per ton)
C. Methodology for evaluation of External Cost for China Table 3 Per Unit External Costs for RES in China
The impact of external cost on the selection of generation Technology Nuclear Solar PV Hydro Wind
technology in the planning process is not considered in China. Cost
However with alarming figure of GHG emissions, deteriorated 0.00875 0.0186 0.0060 0.0026
(US$/KWh)
air quality and increased concern of policy makers and public,
it’s becoming imperative to evaluate the externalities related III. MODEL FORMULATION
to electricity generation in China and internalize them in The GEP model developed in this section has the tendency
policy making. Reference [15] evaluated the external cost to deal with the intermittent nature of RES while incorporating
values from electricity production in China under different the externalities related with the power production sector. The
scenarios but didn’t consider the impact of internalizing suggested model evaluates the type and number of new power
externalities on the structural changes and selection of plants so that current and future electricity demands are met
generation technologies in the GEP problem. and overall cost of fleet expansion is minimized.
This paper uses the external cost factors derived from [15] A. Objective Function
to calculate the external cost values for conventional energy
technologies and RES in China and internalize them in GEP The objective function of the proposed model comprises of
problem. Reference [15] used dose response functions for the minimizing the total costs associated with meeting electricity
quantification of health damage due to GHG emissions of demand in the planning horizon while also including the
fossil fuel fired power plants while transformation to monetary externalities of electricity production.
values was done by the application of “willingness to pay” Total cost, Ctotal, to be minimized over the planning horizon is
approach. given by (1).

For the calculation of external cost, pollutants are divided (1)

in following two categories: Where
1) Those having regional impact and causes damage to Cinv The investment cost
human health and ambient environment such as Cfuel The fuel cost
oxides of sulfur, nitrogen and particulate matter. CO&M The operation and maintenance cost
2) Those having global impact and causes climate CEF The external cost for fossil fuel power plants
change such as CO2 CER The external cost associated with RES
These cost parameters are considered for the existing units
External cost is calculated differently for fossil fuel fired
as well as the candidate plants
power plants and RES. For fossil fuel fired power plants, the
first step in the calculation of external cost includes the 1) Investment Cost
determination of emission inventory of different pollutants
emitted from fossil fuel fired power plants. Emission factors The levelised investment cost for creating a new power
of airborne pollutants are used to calculate the emission plant in terms of $/MWh is modeled by (2)
inventory of different pollutants and are derived from [16]. (2)
Since SO2 emissions are dependent on sulfur content of coal,
the average sulfur content of coal used in China was 1.27% 2) Fuel Cost
and 1.08% in 1990 and 2000 respectively as in [16]. The fuel cost of new and existing power plants in terms of
Second step involves determination of unit damage costs of $/MWh is modeled by (3) and (4).It is assumed that fuel costs
different pollutants in China which are derived from [15] and remain constant throughout the planning horizon.
are presented in Table 2. Emissions within fossil fuel (3)
technologies depends on the efficiency of particular
technology and emission control systems therefore external (4)
cost for fossil fuel technologies is modeled as a function of
efficiency. Finally external cost for fossil fuel technologies is 3) Operation and Maintenance Cost
charged on the basis of amount of pollutant emitted. Operation and Maintenance (O & M) of new and existing
power plants in terms of $/MWh is modeled by (5) and

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 2014 IEEE International Conference on Intelligent Energy and Power Systems (IEPS)
(6).O&M costs consist of fixed and variable terms. Here only
variable term is considered and it is assumed to remain
constant throughout the planning period.
(5)
(6)
4) External costs associated with fossil fuel fired power
plants
External costs for new and existing fossil fuel fired power
plants are modeled as a function of efficiency and emissions
of a particular pollutant per unit of energy produced and are
given by (7) and (8).
(7)
(8)
5) External costs associated with RES
For RES, the external costs are modeled as function of
energy produced and are given by (9) and (10)
(9)
(10)
The GEP problem to be considered is mathematically
formulated after combining (2) - (10) as follows
(11)
B. Constraints
For minimization of objective function given by (11), the
following constraints must be fulfilled. All the constraints are
linear inequality constraints
1) Annual Energy Demand Constraint
The annual energy generated from the entire fleet including
new and existing power plants must exceed the annual energy
demand
(12)
2) Power generation constraint
This constraint is formulated to make sure that the
generation capacity should meet the load plus spinning reserve
requirements of the system.
138
(13)
3) Upper and Lower Bound Constraints
(14)
This paper applies the evolutionary based Genetic
Algorithm (GA) to solve the problem
IV. APPLICATION OF GA TO SOLVE THE GEP PROBLEM
GA was mainly developed by Holland. The basis of GA is
the survival of fittest theory.GA has been successfully applied
to solve the GEP problem [17].GA works by creating a
population of possible solutions known as genomes and
evaluating the fitness of each genome. Choosing the fittest
genomes as parents and applying different operators, next
generation is produced. The algorithm proceeds in a similar
pattern unless the solution is found.
GA has several advantages over conventional optimization
techniques. Firstly GA doesn’t need derivatives and other
auxiliary information for optimization. Secondly GA uses
probabilistic transition rules to find the solution. Finally since
the GA works from a set of points simultaneously, the chances
of finding a pseudo optimal solution are minimized.
In this paper, the string of candidate generating units is
coded as genomes. The decision vector Wt to be determined in
the fitness function depends on the type of technologies
considered and number of years in planning horizon. The
length of the decision vector is the product of number of
technologies and the number of years in planning horizon.
Suppose there are 3 candidate plants and the planning horizon
is 5 years, the length of state vector would be 15 and fitness
function can be represented by (15)
(15)
Where k represents the coefficients/cumulative cost of a
particular type of technology
V. RESULTS AND DISCUSSION
The model and algorithm developed in section IV was
applied to an actual GEP case of one district Power Company
which lies in the western China.Two case studies were
evaluated to see the economical, environmental and structural
impact on the Power Company’s future energy supply
technologies when external cost of energy was integrated in
the planning process. Each case study spans on 6 year time
horizon, starting from 2015 and ending in 2020. The two case
studies examined are:
Base Case: In the Base Case scenario, it is assumed that
external costs are not imposed on the power system and the
current trend of supplying energy to the consumers is
maintained in the future.
Externality Case: In the Externality Case scenario,
externalities produced from power generation are integrated in
the planning process
 2014 IEEE International Conference on Intelligent Energy and Power Systems (IEPS)
The long term load forecast results of the planning area are Table 7 Installed capacity of new units for Base Case
presented in Table 4. The data for existing and candidate
power plants is presented in Table 5 and Table 6 respectively. Unit Type 2015 2016 2017 2018 2019 2020

Table 4 Long-term load forecast results Wind

200 400 500 600 700 1000
(MW)
Year 2015 2016 2017 2018 2019 2020
SPV
Annual 100 200 200 400 500 600
(MW)
Energy
26289 32204 40243 46621 53459 61459
demand PC
700 900 1300 1400 1500 1700
(GWh) (MW)
Annual Load
IGCC
Utilization 5470 5705 5940 6175 6410 6645 500 800 1000 1000 1200 1300
(MW)
Hours
Annual Peak NGCC
Load 1400 1700 2100 2400 2700 2900
4580 5645 6775 7550 8340 9249 (MW)
Demand
(MW) Existing
2000 2000 2000 2000 2000 2000
(MW)
Table 5 Financial Data of existing power plants
B. Externality Case
Power Capacity Fuel Cost O&M Cost Capacity
Efficiency
Plant (MW) ($/MWh) ($/MWh) Factor The results of the externality case are presented in Table
Coal 1200 32.2 4.8 .85 .36
8.The results of this scenario indicate a substantial change in
the fleet structure. The share of RES increases from 13 % to
Natural
Gas
500 83.00 3.5 .75 .45 42% as compared with Base scenario while the contribution of
a
coal fired power plants drops from 17% to 9%.This substantial
NGCC 300 49.4 2.3 .35 .30
change was due to the fact that fossil fuel fired power plants
a Natural Gas Combined Cycle
have high external cost associated with them which makes
Table 6 Financial Data of candidate power plants their operation quite expensive in this scenario. Since more
Capital Fuel O&M RES units are selected in these scenario therefore total CO2
Power Capacity
Plant
Cost Cost Cost
Factor
Efficiency emissions in this scenario are 38580 thousand tons less as
($/MWh) ($/MWh) ($/MWh) compared to base scenario. External costs amounted to 29564
Wind 70.3 0.0 13.1 .34 0.30 million dollars for this scenario. External costs associated with
SPV a
130.4 0.0 9.9 .25 0.40 the fossil fuel fired power plants contribute to a significant
portion of this cost because the external costs of RES were
PCb 65.7 29.2 4.1 .85 .36
almost negligible. Total cost of fleet expansion in this scenario
IGCCc 88.4 37.2 8.8 .85 .42
was 49311 million dollars which is 24587 million dollars more
NGCC 17.4 48.4 1.7 .87 .51 than that of the base case scenario. Total 247587 TWh energy
a Solar Photovoltaic’s
b Pulverized Coal
was generated in this scenario. In this scenario, average cost of
c Integrated Gasification Combined Cycle electricity generation was 19.99 cent $/kWh while the average
All the new generating units are installed by 100 MW per unit. external cost of energy was 11.94 cent $/kWh.
Table 8 Installed capacity of new units for externality case
A. Base Case
2020
The results of the Base case are presented in Table 7. The Unit Type 2015 2016 2017 2018 2019
results show that current trend of electricity production
continues in the future and fossil fuel fired power plants Wind 2800
1200 1800 2200 2300 2500
(MW)
continues to dominate. Since RES have poor capacity factor
and they produce intermittent power therefore their share was SPV 600 700 1000 1000 1200
1500
limited to only 13 %. Despite of the fact that fossil fuel fired (MW)
power plants produce costly electricity and pollute the PC 1000
300 400 600 700 900
environment they took lead on RES. Although electricity (MW)
produced in this scenario was cheap but the environmental IGCC 1000
damage cost to the eco system was more than the avoided 400 500 600 900 900
(MW)
external costs. Total cost of fleet expansion in this scenario
NGCC 1200
was 24724 million dollars. Total 308920 TWh energy was 500 600 800 1000 1100
(MW)
generated in this scenario.CO2 emissions were 109066
thousand tons for this scenario. Average cost of electricity Existing 2000
2000 2000 2000 2000 2000
generation was 8 cent $/KWh. Electricity generated in this (MW)
scenario was cheap because the externalities associated with
Summary of both case studies is presented in Table 9.
the electricity generation were not considered.

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 2014 IEEE International Conference on Intelligent Energy and Power Systems (IEPS)
Table 9 Comparison of both case studies
Base
Case Study
Case
Total Expenditure (Million $) 24727
Average Cost of Electricity(Cent$/KWh) 8.00
External Cost of Energy (Million $) --
CO2 Emissions(Thousand tons) 109066
Share of RES (%) 13
Share of Coal fired power plants (%) 17
VI. CONCLUSION
This paper investigates the effect of integrating
externalities on large scale integration of RES in GEP
problem. External cost values for china were evaluated using
the unit damage costs of pollutants. The proposed model was
implemented in MATLAB using Genetic Algorithm and
applied to an actual GEP case of one of the power companies
that lies in the western China. Two scenarios were considered
to apply the model i.e. Base Case and the Externality Case.
The results of the base case depicted the continuation of
current trend in the electricity generation mix and the share of
RES was restricted to only 13 %.The reliance on fossil fuel
fired plants contributed to the CO2 emissions of 109066
thousand tons in this case which cast a substantial burden on
the environment. The monetary evaluation of this burden
amounts to much more than switching to low emission
technologies and RES. This fact was supported by the results
of externality case. In externality case the share of RES rose
from 13 % to 42 % which resulted in a sharp decline of CO2
emissions to 38580 thousand tons. The results suggest that
internalizing the externalities in the GEP problem serves as a
driving factor in the large scale integration of RES.
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