This paper proposes a new explicit, step-by-step approach for a generating company to evaluate investments considering uncertainties and future expected investment from its competitors. The new framework consists of i) defining some potential investments to be evaluated; ii) anticipating competitors' future expansion plans using dynamic programming; iii) generating future cash-flow for each investment alternative by clearing the market every year considering the anticipated system expansion

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... the life time of the plant; iv) computing each plan's rate of return. The evaluation has been carried out on three different technologies i.e. nuclear, coal and combined cycle power plants. We also introduce a probabilistic valuation model to incorporate risk assessment in the evaluation. We extend the framework to consider uncertainties in future load growth and plant technologies' fuel cost and use a Monte Carlo simulation to capture the statistical fluctuations of the rate of return. We also use a rigorous technique to approximate the load duration curve with a stepfunction. In order to model an oligopoly market, we assume that at higher loads, the generators submit bids higher than their marginal cost. A price duration curve from PJM market is used to extrapolate the bid price of these units.