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An Optimization Model for Production Costing in Electric Utilities

Author

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  • J. C. Ammons

    (Georgia Institute of Technology)

  • L. F. McGinnis

    (Georgia Institute of Technology)

Abstract

Estimating the annual production cost is a crucial component in long range capacity planning for electric utilities. Traditional simulation-based methods are quite expensive in terms of computer resources (space and time), while simpler mathematical programming-based models generally assume a linear variable production cost. This paper presents a method that incorporates quadratic production costs for each unit and uses optimization submodels to develop a system production cost versus output curve. The method is tested using data from a large southeastern utility. Production cost estimates within one percent of the estimates from a large simulation model were obtained with a small fraction of the simulation model's computing time. The concluding section discusses how the new method might be incorporated in procedures for capacity planning.

Suggested Citation

  • J. C. Ammons & L. F. McGinnis, 1983. "An Optimization Model for Production Costing in Electric Utilities," Management Science, INFORMS, vol. 29(3), pages 307-316, March.
    • Handle: RePEc:inm:ormnsc:v:29:y:1983:i:3:p:307-316
    DOI: 10.1287/mnsc.29.3.307
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    Cited by:

    1. Balachandran, Kashi R. & Wang, Hsiao-Wen & Li, Shu-Hsing & Wang, Taychang, 2013. "In-house capability and supply chain decisions," Omega, Elsevier, vol. 41(2), pages 473-484.

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    Keywords

    programming: quadratic; application;

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