This paper proposes a reliability-based competitive generation resource planning model in electricity markets. The Monte Carlo simulation method is applied to consider random outages of generation units and transmission lines as well as load uncertainty. In order to determine the optimal plan for installation of candidate generating units, decisions of Generation Companies (GenCos) and the Independent System Operator (ISO) are investigated. The method is based on an iterative process for simulating interactive among ISO and GenCos and is repeated until assumed security and reliability constraints by ISO are fulfilled. In the proposed model, ISO utilizes a new mechanism for capacity payments such that each GenCo will receive its incentive credits based on its role in improvement of system reliability. In other words, GenCos play indirect roles in system reliability enhancement. Simulation results confirm efficacy of the proposed generation expansion planning model when considering uncertainties in electricity Markets.

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