IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v259y2020ics0306261919316575.html
   My bibliography  Save this article

Overcapacity in European power systems: Analysis and robust optimization approach

Author

Listed:
  • Moret, Stefano
  • Babonneau, Frédéric
  • Bierlaire, Michel
  • Maréchal, François

Abstract

The planning of national power systems is traditionally based on long-term forecasts of electricity demand and fuel prices. However, over such long time horizons (20–50 years), these forecasts often prove to be inaccurate. As an example, wrong projections of low natural gas prices and high electricity demand in Europe in the early 2000s stimulated massive investments in electricity generation, which led to the current situation of overcapacity in the European electricity market. In this work, we first present the issue of overcapacity in Europe and discuss its causes; in particular, we highlight the relationship between overcapacity and errors in forecasts of electricity demand and fuel prices. Then, we apply a novel robust optimization framework to a real-world strategic energy planning problem, and compare it to the standard, deterministic decision-making approach. The results show that the robust investment strategies are up to 58% less likely to require future modifications leading to overcapacity. Overall, this suggests that considering uncertainties in the long-term planning process can reduce the risk of generating overcapacity in national power systems.

Suggested Citation

  • Moret, Stefano & Babonneau, Frédéric & Bierlaire, Michel & Maréchal, François, 2020. "Overcapacity in European power systems: Analysis and robust optimization approach," Applied Energy, Elsevier, vol. 259(C).
    • Handle: RePEc:eee:appene:v:259:y:2020:i:c:s0306261919316575
    DOI: 10.1016/j.apenergy.2019.113970
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261919316575
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.apenergy.2019.113970?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Quashie, Mike & Marnay, Chris & Bouffard, François & Joós, Géza, 2018. "Optimal planning of microgrid power and operating reserve capacity," Applied Energy, Elsevier, vol. 210(C), pages 1229-1236.
    2. Codina Gironès, Victor & Moret, Stefano & Maréchal, François & Favrat, Daniel, 2015. "Strategic energy planning for large-scale energy systems: A modelling framework to aid decision-making," Energy, Elsevier, vol. 90(P1), pages 173-186.
    3. Zhang, Liang & Ruan, Jian & Ding, Jianhua, 2014. "The institutional power shortage in China: Capacity shortage or capacity under-utilisation?," Applied Energy, Elsevier, vol. 136(C), pages 480-494.
    4. Banfi, Silvia & Filippini, Massimo & Luchsinger, Cornelia, 2002. "Deregulation of the Swiss Electricity Industry: Short-Run Implications for the Hydropower Sector," The Electricity Journal, Elsevier, vol. 15(6), pages 69-77, July.
    5. Afful-Dadzie, Anthony & Afful-Dadzie, Eric & Awudu, Iddrisu & Banuro, Joseph Kwaku, 2017. "Power generation capacity planning under budget constraint in developing countries," Applied Energy, Elsevier, vol. 188(C), pages 71-82.
    6. Ciarreta, Aitor & Espinosa, Maria Paz & Pizarro-Irizar, Cristina, 2017. "Has renewable energy induced competitive behavior in the Spanish electricity market?," Energy Policy, Elsevier, vol. 104(C), pages 171-182.
    7. Changhyun Kwon & Taehan Lee & Paul Berglund, 2013. "Robust shortest path problems with two uncertain multiplicative cost coefficients," Naval Research Logistics (NRL), John Wiley & Sons, vol. 60(5), pages 375-394, August.
    8. Papadopoulos, Raphael, 1981. "Communications on energy : Growth and overcapacity in the UK electricity industry," Energy Policy, Elsevier, vol. 9(2), pages 153-155, June.
    9. Ming, Zeng & Ping, Zhang & Shunkun, Yu & Hui, Liu, 2017. "Overall review of the overcapacity situation of China’s thermal power industry: Status quo, policy analysis and suggestions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 76(C), pages 768-774.
    10. Moret, Stefano & Babonneau, Frédéric & Bierlaire, Michel & Maréchal, François, 2020. "Decision support for strategic energy planning: A robust optimization framework," European Journal of Operational Research, Elsevier, vol. 280(2), pages 539-554.
    11. Alham, M.H. & Elshahed, M. & Ibrahim, Doaa Khalil & Abo El Zahab, Essam El Din, 2016. "A dynamic economic emission dispatch considering wind power uncertainty incorporating energy storage system and demand side management," Renewable Energy, Elsevier, vol. 96(PA), pages 800-811.
    12. Heuberger, Clara F. & Rubin, Edward S. & Staffell, Iain & Shah, Nilay & Mac Dowell, Niall, 2017. "Power capacity expansion planning considering endogenous technology cost learning," Applied Energy, Elsevier, vol. 204(C), pages 831-845.
    13. Massimo Filippini & Silvia Banfi & Cornelia Luchsinger, 2002. "Deregulation of the Swiss Electricity Industry: Implication for the Hydropower Sector," CEPE Working paper series 02-13, CEPE Center for Energy Policy and Economics, ETH Zurich.
    14. Mokgonyana, Lesiba & Zhang, Jiangfeng & Li, Hailong & Hu, Yihua, 2017. "Optimal location and capacity planning for distributed generation with independent power production and self-generation," Applied Energy, Elsevier, vol. 188(C), pages 140-150.
    15. A. L. Soyster, 1973. "Technical Note—Convex Programming with Set-Inclusive Constraints and Applications to Inexact Linear Programming," Operations Research, INFORMS, vol. 21(5), pages 1154-1157, October.
    16. Fraser, Hamish & Lo Passo, Francesco, 2003. "Developing a Capacity Payment Mechanism in Italy," The Electricity Journal, Elsevier, vol. 16(9), pages 54-58, November.
    17. Assili, Mohsen & Javidi D.B., M. Hossein & Ghazi, Reza, 2008. "An improved mechanism for capacity payment based on system dynamics modeling for investment planning in competitive electricity environment," Energy Policy, Elsevier, vol. 36(10), pages 3703-3713, October.
    18. Gorissen, Bram L. & Yanıkoğlu, İhsan & den Hertog, Dick, 2015. "A practical guide to robust optimization," Omega, Elsevier, vol. 53(C), pages 124-137.
    19. Dimitris Bertsimas & Melvyn Sim, 2004. "The Price of Robustness," Operations Research, INFORMS, vol. 52(1), pages 35-53, February.
    20. Fabio Genoese & Christian Egenhofer & Michael Hogan & Christian Redl & Markus Steigenberger & Patrick Graichen & Graham Weale, 2015. "The Future of the European Power Market," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 50(4), pages 176-197, July.
    21. Moret, Stefano & Codina Gironès, Víctor & Bierlaire, Michel & Maréchal, François, 2017. "Characterization of input uncertainties in strategic energy planning models," Applied Energy, Elsevier, vol. 202(C), pages 597-617.
    22. Bunn, Derek W & Larsen, Erik R, 1994. "Assessment of the uncertainty in future UK electricity investment using an industry simulation model," Utilities Policy, Elsevier, vol. 4(3), pages 229-236, July.
    23. Wei, Wei & Liu, Feng & Wang, Jianhui & Chen, Laijun & Mei, Shengwei & Yuan, Tiejiang, 2016. "Robust environmental-economic dispatch incorporating wind power generation and carbon capture plants," Applied Energy, Elsevier, vol. 183(C), pages 674-684.
    24. Sugiyama, Masahiro, 2012. "Climate change mitigation and electrification," Energy Policy, Elsevier, vol. 44(C), pages 464-468.
    25. Gabrielli, Paolo & Fürer, Florian & Mavromatidis, Georgios & Mazzotti, Marco, 2019. "Robust and optimal design of multi-energy systems with seasonal storage through uncertainty analysis," Applied Energy, Elsevier, vol. 238(C), pages 1192-1210.
    26. Koltsaklis, Nikolaos E. & Dagoumas, Athanasios S. & Kopanos, Georgios M. & Pistikopoulos, Efstratios N. & Georgiadis, Michael C., 2014. "A spatial multi-period long-term energy planning model: A case study of the Greek power system," Applied Energy, Elsevier, vol. 115(C), pages 456-482.
    27. Quiroga, Daniela & Sauma, Enzo & Pozo, David, 2019. "Power system expansion planning under global and local emission mitigation policies," Applied Energy, Elsevier, vol. 239(C), pages 1250-1264.
    28. Hach, Daniel & Spinler, Stefan, 2016. "Capacity payment impact on gas-fired generation investments under rising renewable feed-in — A real options analysis," Energy Economics, Elsevier, vol. 53(C), pages 270-280.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Limpens, Gauthier & Rixhon, Xavier & Contino, Francesco & Jeanmart, Hervé, 2024. "EnergyScope Pathway: An open-source model to optimise the energy transition pathways of a regional whole-energy system," Applied Energy, Elsevier, vol. 358(C).
    2. Sebastian Schäfer & Lisa Altvater, 2021. "A Capacity Market for the Transition towards Renewable-Based Electricity Generation with Enhanced Political Feasibility," Energies, MDPI, vol. 14(18), pages 1-24, September.
    3. Jun Liu & Yu Qian & Huihong Chang & Jeffrey Yi-Lin Forrest, 2022. "The Impact of Technology Innovation on Enterprise Capacity Utilization—Evidence from China’s Yangtze River Economic Belt," Sustainability, MDPI, vol. 14(18), pages 1-17, September.
    4. Annika Gillich & Kai Hufendiek, 2022. "Asset Profitability in the Electricity Sector: An Iterative Approach in a Linear Optimization Model," Energies, MDPI, vol. 15(12), pages 1-31, June.
    5. Borasio, M. & Moret, S., 2022. "Deep decarbonisation of regional energy systems: A novel modelling approach and its application to the Italian energy transition," Renewable and Sustainable Energy Reviews, Elsevier, vol. 153(C).
    6. Guevara, Esnil & Babonneau, Fréderic & Homem-de-Mello, Tito & Moret, Stefano, 2020. "A machine learning and distributionally robust optimization framework for strategic energy planning under uncertainty," Applied Energy, Elsevier, vol. 271(C).
    7. Wang, Zhan-ao & Zheng, Chengsi, 2022. "Is technological innovation the cure for overcapacity? Exploring mediating and moderating mechanisms," Journal of Business Research, Elsevier, vol. 147(C), pages 348-361.
    8. Abdin, Adam F. & Caunhye, Aakil & Zio, Enrico & Cardin, Michel-Alexandre, 2022. "Optimizing generation expansion planning with operational uncertainty: A multistage adaptive robust approach," Applied Energy, Elsevier, vol. 306(PA).
    9. Wang, Delu & Wang, Yadong & Jiang, Wuding & Shi, Xunpeng, 2023. "Has outward foreign direct investment alleviated industrial overcapacity in China? An empirical test of the upstream and downstream industrial links," Structural Change and Economic Dynamics, Elsevier, vol. 67(C), pages 250-263.
    10. Zhang, Weike & Meng, Jia & Tian, Xiaoli, 2020. "Does de-capacity policy enhance the total factor productivity of China's coal companies? A Regression Discontinuity design," Resources Policy, Elsevier, vol. 68(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Radhanon Diewvilai & Kulyos Audomvongseree, 2021. "Generation Expansion Planning with Energy Storage Systems Considering Renewable Energy Generation Profiles and Full-Year Hourly Power Balance Constraints," Energies, MDPI, vol. 14(18), pages 1-25, September.
    2. Sun, Hao & Yang, Jun & Yang, Chao, 2019. "A robust optimization approach to multi-interval location-inventory and recharging planning for electric vehicles," Omega, Elsevier, vol. 86(C), pages 59-75.
    3. Antonio G. Martín & Manuel Díaz-Madroñero & Josefa Mula, 2020. "Master production schedule using robust optimization approaches in an automobile second-tier supplier," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 28(1), pages 143-166, March.
    4. Wang, Tian & Deng, Shiming, 2019. "Multi-Period energy procurement policies for smart-grid communities with deferrable demand and supplementary uncertain power supplies," Omega, Elsevier, vol. 89(C), pages 212-226.
    5. Guevara, Esnil & Babonneau, Fréderic & Homem-de-Mello, Tito & Moret, Stefano, 2020. "A machine learning and distributionally robust optimization framework for strategic energy planning under uncertainty," Applied Energy, Elsevier, vol. 271(C).
    6. Aura Jalal & Aldair Alvarez & Cesar Alvarez-Cruz & Jonathan La Vega & Alfredo Moreno, 2023. "The robust multi-plant capacitated lot-sizing problem," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 31(2), pages 302-330, July.
    7. Kramer, Anja & Krebs, Vanessa & Schmidt, Martin, 2021. "Strictly and Γ-robust counterparts of electricity market models: Perfect competition and Nash–Cournot equilibria," Operations Research Perspectives, Elsevier, vol. 8(C).
    8. Xavier Rixhon & Gauthier Limpens & Diederik Coppitters & Hervé Jeanmart & Francesco Contino, 2021. "The Role of Electrofuels under Uncertainties for the Belgian Energy Transition," Energies, MDPI, vol. 14(13), pages 1-23, July.
    9. Curcio, Eduardo & Amorim, Pedro & Zhang, Qi & Almada-Lobo, Bernardo, 2018. "Adaptation and approximate strategies for solving the lot-sizing and scheduling problem under multistage demand uncertainty," International Journal of Production Economics, Elsevier, vol. 202(C), pages 81-96.
    10. Zhang, Yu & Tang, Jiafu, 2018. "A robust optimization approach for itinerary planning with deadline," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 113(C), pages 56-74.
    11. Petkov, Ivalin & Gabrielli, Paolo, 2020. "Power-to-hydrogen as seasonal energy storage: an uncertainty analysis for optimal design of low-carbon multi-energy systems," Applied Energy, Elsevier, vol. 274(C).
    12. Moret, Stefano & Codina Gironès, Víctor & Bierlaire, Michel & Maréchal, François, 2017. "Characterization of input uncertainties in strategic energy planning models," Applied Energy, Elsevier, vol. 202(C), pages 597-617.
    13. Scott, Ian J. & Botterud, Audun & Carvalho, Pedro M.S. & Silva, Carlos A. Santos, 2020. "Renewable energy support policy evaluation: The role of long-term uncertainty in market modelling," Applied Energy, Elsevier, vol. 278(C).
    14. Soyster, A.L. & Murphy, F.H., 2017. "Data driven matrix uncertainty for robust linear programming," Omega, Elsevier, vol. 70(C), pages 43-57.
    15. Mahdi Karami Darabi & Hamed Ganjeh Ganjehlou & Amirreza Jafari & Morteza Nazari-Heris & Gevork B. Gharehpetian & Mehrdad Abedi, 2021. "Evaluating the Effect of Demand Response Programs (DRPs) on Robust Optimal Sizing of Islanded Microgrids," Energies, MDPI, vol. 14(18), pages 1-20, September.
    16. Li, Xingchen & Xu, Guangcheng & Wu, Jie & Xu, Chengzhen & Zhu, Qingyuan, 2024. "Evaluation of bank efficiency by considering the uncertainty of nonperforming loans," Omega, Elsevier, vol. 126(C).
    17. Wenqing Chen & Melvyn Sim & Jie Sun & Chung-Piaw Teo, 2010. "From CVaR to Uncertainty Set: Implications in Joint Chance-Constrained Optimization," Operations Research, INFORMS, vol. 58(2), pages 470-485, April.
    18. Zhi Chen & Melvyn Sim & Huan Xu, 2019. "Distributionally Robust Optimization with Infinitely Constrained Ambiguity Sets," Operations Research, INFORMS, vol. 67(5), pages 1328-1344, September.
    19. Stefan Mišković, 2017. "A VNS-LP algorithm for the robust dynamic maximal covering location problem," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(4), pages 1011-1033, October.
    20. Østergaard, P.A. & Lund, H. & Thellufsen, J.Z. & Sorknæs, P. & Mathiesen, B.V., 2022. "Review and validation of EnergyPLAN," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:259:y:2020:i:c:s0306261919316575. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.