Planning Electric Power Systems Under Demand Uncertainty with Different Technology Lead Times

Douglas T. Gardner and J. Scott Rogers
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Douglas T. Gardner: Algorithmics Inc., 185 Spadina Avenue, Toronto, Ontario, Canada M5T 2C6
J. Scott Rogers: Department of Mechanical and Industrial Engineering, University of Toronto, Toronto, Ontario, Canada M5S 1A4

Management Science, 1999, vol. 45, issue 10, 1289-1306

Abstract: Demand uncertainty is a key concern of electric utility planners. While the greater use of short lead time technologies provides one possible way to deal with this problem, it is not clear how they are best deployed. The approach taken in this paper is to examine a capacity mix model that explicitly accounts for differences in technology lead times. Key results that are obtained include the characterization of the optimal solution and the development of a new set of technology screening criteria. In practice, the "lead time order" (i.e., the set of available technologies ordered by ascending length of lead time) is typically the inverse of the so-called merit order (i.e., the set of available technologies ordered by ascending operating cost). We show that for this case, the optimal solution may be determined with relative ease. A numerical example demonstrates that some short lead time technologies screened out by standard planning methods may enter the optimal solution when differences in lead time are considered, while some long lead time technologies may leave. In addition, the optimal expected level of reliability may be greater.

Keywords: lead time; capacity planning; demand uncertainty; electric power systems (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:45:y:1999:i:10:p:1289-1306

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