Intertemporal Allocation of Capital Costs in Electric Utility Capacity Expansion Planning Under Uncertainty
AbstractThis paper concerns marginal cost pricing in a capacity expansion problem for the electric utility industry. We develop a characterization of equipment selection and marginal capital cost allocation based on an optimal capacity plan, in the context of either a finite, discretely distributed stochastic demand forecast, or in the deterministic case of multiple users identified by temporal considerations. In either case, a two stage linear program with recourse is shown to result. The main purpose of this paper is to conduct an analysis in order to determine a marginal cost pricing strategy for sharing capital costs given an optimal capacity plan, and to provide insightful economic interpretations. Our results also generalize a special case previously studied to demonstrate how a marginal cost pricing strategy may result in some of the capacity costs being borne by off-peak users.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 30 (1984)
Issue (Month): 1 (January)
facilities planning-capacity expansion;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Haugen, Kjetil K., 1996. "A Stochastic Dynamic Programming model for scheduling of offshore petroleum fields with resource uncertainty," European Journal of Operational Research, Elsevier, vol. 88(1), pages 88-100, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.