Minimum-cost-based capacity planning: does annualized capital expenditure always yield full cost recovery with marginal pricing? Proofs of the statements

E. Centeno, F.A. Campos, J. Maguregui, L.J. Fernández, S. Wogrin

Spanish layman's summary:

Este artículo estudia bajo qué condiciones los modelos de Expansión de la Capacidad garantizan la recuperación de costes bajo precios marginales de corto y largo plazo, el papel del valor residual y de los costes de inversión en activos cuya vida útil excede el horizonte de estudio.

English layman's summary:

This work demonstrates under which conditions Capacity Expansion models guarantee cost recovery using marginal pricing, the differences between short- and long-run marginal costs, the role of residual value, and the impact of investment costs for assets exceeding the study horizon.

Keywords: Expansion planning; Investment cost; Cost annualization; Marginal pricing; Electricity market; Power market

Registration date: 12/05/2025

IIT-25-134WP