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Stochastic programming in energy

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  • Stein W. Wallace

    (Molde University College)

  • Stein-Erik Fleten

    (Norwegian University of Science and Technology)

Abstract

We give the reader a tour of good energy optimization models that explicitly deal with uncertainty. The uncertainty usually stems from unpredictability of demand and/or prices of energy, or from resource availability and prices. Since most energy investments or operations involve irreversible decisions, a stochastic programming approach is meaningful. Many of the models deal with electricity investments and operations, but some oil and gas applications are also presented. We consider both traditional cost minimization models and newer models that reflect industry deregulation processes. The oldest research coincides with the birth of linear programming, and most models within the market paradigm have not yet found their final form.

Suggested Citation

  • Stein W. Wallace & Stein-Erik Fleten, 2002. "Stochastic programming in energy," GE, Growth, Math methods 0201001, EconWPA, revised 13 Nov 2003.
  • Handle: RePEc:wpa:wuwpge:0201001 Note: Type of Document - Acrobat PDF; pages: 1. Published in "Stochastic Programming", A. Ruszczynksi and A. Shapiro (eds), Vol. 10 in the series Handbooks in Operations Research and Management Science, North-Holland, 2003
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    Keywords

    stochastic programming; energy; regulated markets; deregulation; uncertainty; electricity; natural gas; oil;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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