Medium-term Planning for Thermal Electricity Production

Raimund Kovacevic () and Florentina Paraschiv

No 1220, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: In the present paper we demonstrate a mid-term planning model for thermal power generation which is based on multistage stochastic optimization and involves stochastic electricity spot prices, mixture of fuels with stochastic prices, the effect of CO2 emission prices and various types of further operating costs. Going from data to decisions, the first goal is to estimate simulation models for various commodity prices. We apply geometric Brownian motions with jumps to model gas, coal, oil and emission allowance (EUA) spot prices. Electricity spot prices are modeled by a regime switching approach which takes into account seasonal effects as well as jumps and spikes. Given the estimated models we simulate scenario paths and then use a novel approach based on a multiperiod generalization of the Wasserstein distance for constructing the stochastic trees used in the optimization model. Finally, we solve a one year planning problem for a fictitious configuration of thermal units, producing against the markets. Numerical examples are used to demonstrate the effect of CO2 prices on cumulated emissions and to show an application of indifference pricing to electricity delivery contracts.

Keywords: multistage stochastic programming; tree generation; electricity production; modeling commodity spot prices. (search for similar items in EconPapers)
Pages: 39 pages
Date: 2012-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1220.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2012:20

Access Statistics for this paper

More papers in Working Papers on Finance from University of St. Gallen, School of Finance Contact information at EDIRC.
Bibliographic data for series maintained by ().