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Peak Load Pricing and Capacity Planning with Demand and Supply Uncertainty

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  • Hung-po Chao
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    Abstract

    The peak load pricing problem has been discussed quite extensively in the literature. Central to the problem is the choice of output capacity and price for a basically nonstorable commodity such as electricity. This article considers both uncertain demand and uncertain capacity simultaneously in a simple model and generalizes earlier analyses, notably in two respects. First, we examine the demand uncertainty in a more general framework within which previous specifications of demand uncertainty can be seen as special cases. Second, we take explicit account of the random availability of the installed capacity. New insights are obtained and discussed in this article.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal Bell Journal of Economics.

    Volume (Year): 14 (1983)
    Issue (Month): 1 (Spring)
    Pages: 179-190

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    Handle: RePEc:rje:bellje:v:14:y:1983:i:spring:p:179-190

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    Cited by:
    1. Chao, Hung-po, 2011. "Efficient pricing and investment in electricity markets with intermittent resources," Energy Policy, Elsevier, vol. 39(7), pages 3945-3953, July.
    2. N. Vijayamohanan Pillai, 2007. "Reliability and Rationing Cost in a Power System," Working Papers id:997, eSocialSciences.
    3. J. Elnaboulsi, 2001. "Nonlinear Pricing and Capacity Planning for Water and Wastewater Services," Water Resources Management, Springer, vol. 15(1), pages 55-69, February.
    4. Milstein, Irena & Tishler, Asher, 2012. "The inevitability of capacity underinvestment in competitive electricity markets," Energy Economics, Elsevier, vol. 34(1), pages 62-77.
    5. Milstein, Irena & Tishler, Asher, 2011. "Intermittently renewable energy, optimal capacity mix and prices in a deregulated electricity market," Energy Policy, Elsevier, vol. 39(7), pages 3922-3927, July.
    6. Fischer, Ronald & Serra, Pablo, 2003. "Energy prices in the presence of plant indivisibilities," Energy Economics, Elsevier, vol. 25(4), pages 303-314, July.
    7. Keppo, Jussi & Rasanen, Mika, 1999. "Pricing of electricity tariffs in competitive markets," Energy Economics, Elsevier, vol. 21(3), pages 213-223, June.
    8. Yilmaz, Pelin & Hakan Hocaoglu, M. & Konukman, Alp Er S., 2008. "A pre-feasibility case study on integrated resource planning including renewables," Energy Policy, Elsevier, vol. 36(3), pages 1223-1232, March.
    9. Tishler, Asher & Milstein, Irena & Woo, Chi-Keung, 2008. "Capacity commitment and price volatility in a competitive electricity market," Energy Economics, Elsevier, vol. 30(4), pages 1625-1647, July.
    10. Spiecker, Stephan & Vogel, Philip & Weber, Christoph, 2013. "Evaluating interconnector investments in the north European electricity system considering fluctuating wind power penetration," Energy Economics, Elsevier, vol. 37(C), pages 114-127.
    11. Stephan Spiecker & Volker Eickholt, 2013. "The Impact Of Carbon Capture And Storage On A Decarbonized German Power Market," EWL Working Papers 1304, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Oct 2013.
    12. Roques, F. & Newbery, D.M. & Nuttall, W.J., 2004. "Generation Adequacy and Investment Incentives in Britain: from the Pool to NETA," Cambridge Working Papers in Economics 0459, Faculty of Economics, University of Cambridge.
    13. Thure Traber, 2014. "Capacity Mechanisms on Central European Electricity Markets: Effects on Consumers, Producers and Technologies until 2033," Discussion Papers of DIW Berlin 1385, DIW Berlin, German Institute for Economic Research.
    14. de Villemeur, Étienne, 2007. "Une tarification saisonnière pour le gaz? Les coûts d'un schéma de régulation rigide pour un bien stockable dont la demande varie," IDEI Working Papers 434, Institut d'Économie Industrielle (IDEI), Toulouse.
    15. N. Vijayaymohanan Pillai, 2002. "Reliability and rationing cost in a power system," Centre for Development Studies, Trivendrum Working Papers 325, Centre for Development Studies, Trivendrum, India.
    16. Richard Arnott, 1992. "Information and Usage of Congestible Facilities Under Free Access," Discussion Papers 974, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    17. Yang, Liu & Dong, Ciwei & Wan, C.L. Johnny & Ng, Chi To, 2013. "Electricity time-of-use tariff with consumer behavior consideration," International Journal of Production Economics, Elsevier, vol. 146(2), pages 402-410.

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