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Uncertainty and Investment in Electricity Generation with an Application to the Case of Hydro-Québec

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  • Corinne Chaton
  • Joseph Doucet

Abstract

The electricity industry is undergoing a substantial process of restructuring, with an emphasis on the introduction of competition in the generation sector. Traditional planning methods are not necessarily appropriate for this new environment. This paper extends a previously developed linear programming model to the problem of optimal expansion planning in the face of uncertainty. The model explicitly accounts for equipment availability and load duration curves in selecting optimal investment. The use of the model is illustrated with a simple 2-region problem calibrated with data from Hydro-Québec and the northeastern United States that suggests how the LP model can help decision makers. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • Corinne Chaton & Joseph Doucet, 2003. "Uncertainty and Investment in Electricity Generation with an Application to the Case of Hydro-Québec," Annals of Operations Research, Springer, vol. 120(1), pages 59-80, April.
    • Handle: RePEc:spr:annopr:v:120:y:2003:i:1:p:59-80:10.1023/a:1023370211456
    DOI: 10.1023/A:1023370211456
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    Cited by:

    1. Madlener, Reinhard & Kumbaroglu, Gurkan & Ediger, Volkan S., 2005. "Modeling technology adoption as an irreversible investment under uncertainty: the case of the Turkish electricity supply industry," Energy Economics, Elsevier, vol. 27(1), pages 139-163, January.
    2. MADLENER Reinhard & KUMBAROĞLU Gurkan EDIGER Volkan S., 2010. "Technology Adoption Modelling in Situations of Irreversible Investments under Uncertainty: The Case of the Turkish Electricity Supply Industry," EcoMod2003 330700092, EcoMod.
    3. S. Oliveira, Fernando & William-Rioux, Bertrand & Pierru, Axel, 2023. "Capacity expansion in liberalized electricity markets with locational pricing and renewable energy investments," Energy Economics, Elsevier, vol. 127(PB).
    4. Andreas Welling, 2017. "Green Finance: Recent developments, characteristics and important actors," FEMM Working Papers 170002, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    5. Oliveira, Fernando S. & Costa, Manuel L.G., 2018. "Capacity expansion under uncertainty in an oligopoly using indirect reinforcement-learning," European Journal of Operational Research, Elsevier, vol. 267(3), pages 1039-1050.
    6. Abdessalem Abbassi & Ahlem Dakhlaoui & Nihed Ben Khalifa, 2023. "Risk Aversion and Hydro-energy Reservoirs Management under Monopolistic and Oligopolistic Industrial Structures," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 581-590, November.
    7. Roques, Fabien A., 2008. "Technology choices for new entrants in liberalized markets: The value of operating flexibility and contractual arrangements," Utilities Policy, Elsevier, vol. 16(4), pages 245-253, December.
    8. E. Borgonovo & L. Peccati, 2010. "Moment calculations for piecewise-defined functions: an application to stochastic optimization with coherent risk measures," Annals of Operations Research, Springer, vol. 176(1), pages 235-258, April.
    9. Chaton, Corinne & Guillerminet, Marie-Laure, 2013. "Competition and environmental policies in an electricity sector," Energy Economics, Elsevier, vol. 36(C), pages 215-228.
    10. Abbassi, Abdessalem & Dakhlaoui, Ahlem & Tamini, Lota D., 2014. "Risk Aversion and Dynamic Games Between Hydroelectric Operators under Uncertainty," Working Papers 172089, University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE).
    11. Zon, Adriaan van & Fuss, Sabine, 2006. "Irreversible Investment under Uncertainty in Electricity Generation: A Clay-Clay-Vintage Portfolio Approach with an Application to Climate Change Policy in the UK," MERIT Working Papers 2006-035, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    12. Henrik C. Bylling & Salvador Pineda & Trine K. Boomsma, 2020. "The impact of short-term variability and uncertainty on long-term power planning," Annals of Operations Research, Springer, vol. 284(1), pages 199-223, January.
    13. Corinne Chaton & Marie-Laure Guillerminet & Cécile Bazart, 2007. "Optimal Design of Electricity Generation Industry under Deregulation and Support to Renewable Energies," Energy and Environmental Modeling 2007 24000008, EcoMod.

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