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A risk function for the stochastic modeling of electric capacity expansion

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  • A. Marín
  • J. Salmerón

Abstract

We present a stochastic optimization model for planning capacity expansion under capacity deterioration and demand uncertainty. The paper focuses on the electric sector, although the methodology can be used in other applications. The goals of the model are deciding which energy types must be installed, and when. Another goal is providing an initial generation plan for short periods of the planning horizon that might be adequately modified in real time assuming penalties in the operation cost. Uncertainty is modeled under the assumption that the demand is a random vector. The cost of the risk associated with decisions that may need some tuning in the future is included in the objective function. The proposed scheme to solve the nonlinear stochastic optimization model is Generalized Benders' decomposition. We also exploit the Benders' subproblem structure to solve it efficiently. Computational results for moderate‐size problems are presented along with comparison to a general‐purpose nonlinear optimization package. © 2001 John Wiley & Sons, Inc. Naval Research Logistics 48:662–683, 2001

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  • A. Marín & J. Salmerón, 2001. "A risk function for the stochastic modeling of electric capacity expansion," Naval Research Logistics (NRL), John Wiley & Sons, vol. 48(8), pages 662-683, December.
    • Handle: RePEc:wly:navres:v:48:y:2001:i:8:p:662-683
    DOI: 10.1002/nav.1041
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    Cited by:

    1. Mengshi Lu & Zuo‐Jun Max Shen, 2021. "A Review of Robust Operations Management under Model Uncertainty," Production and Operations Management, Production and Operations Management Society, vol. 30(6), pages 1927-1943, June.
    2. Rahul R. Marathe & Sarah M. Ryan, 2009. "Capacity expansion under a service‐level constraint for uncertain demand with lead times," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(3), pages 250-263, April.

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