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, the decisions of generation companies (GenCos) and the independent system operators (ISOs) are investigated. The method is based on an iterative process for simulating interactivity among ISOs and GenCos and is repeated until security and reliability constraints assumed by the ISO are fullled. In the proposed model, the 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 conrm ecacy of the proposed generation expansion planning model when considering uncertainties in electricity markets.

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