Medium-term planning for thermal electricity production

Item Type Journal paper
Abstract In the present paper, we present a mid-term planning model for thermal power generation which is based on multistage stochastic optimization and involves stochastic electricity spot prices, a mixture of fuels with stochastic prices, the effect of CO 2 emission prices and various types of further operating costs. Going from data to decisions, the first goal was to estimate simulation models for various commodity prices. We apply Geometric Brownian motions with jumps to model gas, coal, oil and emission allowance spot prices. Electricity spot prices are modeled by a regime switching approach which takes into account seasonal effects and spikes. Given the estimated models, we simulate scenario paths and then use a multiperiod generalization of the Wasserstein distance for constructing the stochastic trees used in the optimization model. Finally, we solve a 1-year planning problem for a fictitious configuration of thermal units, producing against the markets. We use the implemented model to demonstrate the effect of CO 2 prices on cumulated emissions and to apply the indifference pricing principle to simple electricity delivery contracts.
Authors Kovacevic, Raimund & Paraschiv, Florentina
Journal or Publication Title OR Spectrum
Language English
Keywords Multistage stochastic programming, Tree generation, Electricity production, Modeling commodity spot prices
Subjects economics
HSG Classification contribution to scientific community
HSG Profile Area SEPS - Quantitative Economic Methods
Refereed Yes
Date July 2014
Publisher Springer
Place of Publication Heidelberg
Volume 36
Number 3
Page Range 1-37
Number of Pages 37
ISSN 0171-6468
ISSN-Digital 1436-6304
Publisher DOI
Depositing User Prof. Dr. Florentina Paraschiv
Date Deposited 13 Dec 2012 12:23
Last Modified 01 Feb 2023 01:22


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Kovacevic, Raimund & Paraschiv, Florentina (2014) Medium-term planning for thermal electricity production. OR Spectrum, 36 (3). 1-37. ISSN 0171-6468

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