A stochastic model for the single producer capacity expansion problem in the Italian electricity market

We present stochastic models for determining the optimal mix of different technologies for electricity generation, ranging from coal, nuclear and combined cycle gas turbine to hydroelectric, wind and photovoltaic, taking into account the existing plants, the cost of investment in new plants, the mantainance cost, the purchase and sales of CO2 emission trading certificates and green certificates to satisfy regulatory requirements. We assume the point of view of price-taker producer. The stochasticity is related to the future fuel prices and to the future price of CO2 emissions permits: we generate scenarios for the fuel prices and only one scenario fro CO2 emission permits. The stochasticity appears in the expected costs and the probability that the total cost do not overcome a specific threshold is taken into account by considering CVaR risk measure.