Irreversible investments with delayed reaction: an application to generation re-dispatch in power system operation

Magnus Perninge () and Lennart Söder

Mathematical Methods of Operations Research, 2014, vol. 79, issue 2, 195-224

Abstract: In this article we consider how the operator of an electric power system should activate bids on the regulating power market in order to minimize the expected operation cost. Important characteristics of the problem are reaction times of actors on the regulating market and ramp-rates for production changes in power plants. Neglecting these will in general lead to major underestimation of the operation cost. Including reaction times and ramp-rates leads to an impulse control problem with delayed reaction. Two numerical schemes to solve this problem are proposed. The first scheme is based on the least-squares Monte Carlo method developed by Longstaff and Schwartz (Rev Financ Stud 14:113–148, 2001 ). The second scheme which turns out to be more efficient when solving problems with delays, is based on the regression Monte Carlo method developed by Tsitsiklis and van Roy (IEEE Trans Autom Control 44(10):1840–1851, 1999 ) and (IEEE Trans Neural Netw 12(4):694–703, 2001 ). The main contribution of the article is the idea of using stochastic control to find an optimal strategy for power system operation and the numerical solution schemes proposed to solve impulse control problems with delayed reaction. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Delayed reaction; Irreversible investment; Impulse control; Numerical solution; Power system operation; Reflected BSDE; Snell envelope (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s00186-013-0459-0

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