Indonesia's deregulated generation expansion planning model based on mixed strategy game theory model for determining the optimal power purchase agreement

—Obtaining the optimal power purchase agreements (PPA) in deregulated generation expansion planning is crucial. A lower PPA provided by the utility results in the independent power producer (IPP) becoming disinterested in investment. On the other hand, a higher PPA increases the government's financial burden. Therefore, this study proposes a generation expansion planning model that considers the deregulated market and PPA determination. A game theory based on a mixed strategy method and bi-level model is used in this research. To obtain the PPA optimum value, a multi-scenario analysis is conducted by changing the PPAs from 25% to 100% of the generation cost. The proposed model is applied to the Bangka Belitung power system. The results of the multi-scenario analysis show that the optimum PPA is 30% of Bangka Belitung's generation cost. This PPA creates an optimum generation expansion planning with a levelized electricity cost of 6.009 cents USD/kWh. However, the utility cannot offer a PPA of less than 30% of the generation cost because the private sector is not interested in investing. Therefore, it forces the utility to rent diesel power plants and increases the LCOE to 8.629 cents USD/kWh. [Display omitted] •Obtaining the optimal PPA in deregulated generation expansion planning is crucial.•This research proposed a deregulated GEP model to determine the optimum PPA.•Game theory based on a mixed strategy and a bi-level model was used in this research.•Improper value of PPA has an impact on increasing generation costs or IPP disinterested.•The optimum PPA of Bangka Belitung system is 30% of Bangka Belitung's generation cost.