IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v30y1984i1p1-19.html
   My bibliography  Save this article

Intertemporal Allocation of Capital Costs in Electric Utility Capacity Expansion Planning Under Uncertainty

Author

Listed:
  • H. D. Sherali

    (Virginia Polytechnic Institute and State University)

  • A. L. Soyster

    (Pennsylvania State University)

  • F. H. Murphy

    (Temple University)

  • S. Sen

    (University of Arizona)

Abstract

This paper concerns marginal cost pricing in a capacity expansion problem for the electric utility industry. We develop a characterization of equipment selection and marginal capital cost allocation based on an optimal capacity plan, in the context of either a finite, discretely distributed stochastic demand forecast, or in the deterministic case of multiple users identified by temporal considerations. In either case, a two stage linear program with recourse is shown to result. The main purpose of this paper is to conduct an analysis in order to determine a marginal cost pricing strategy for sharing capital costs given an optimal capacity plan, and to provide insightful economic interpretations. Our results also generalize a special case previously studied to demonstrate how a marginal cost pricing strategy may result in some of the capacity costs being borne by off-peak users.

Suggested Citation

  • H. D. Sherali & A. L. Soyster & F. H. Murphy & S. Sen, 1984. "Intertemporal Allocation of Capital Costs in Electric Utility Capacity Expansion Planning Under Uncertainty," Management Science, INFORMS, vol. 30(1), pages 1-19, January.
    • Handle: RePEc:inm:ormnsc:v:30:y:1984:i:1:p:1-19
    DOI: 10.1287/mnsc.30.1.1
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.30.1.1
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.30.1.1?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
    ---><---

    Citations

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


    Cited by:

    1. Kim, Dowon & Ryu, Heelang & Lee, Jiwoong & Kim, Kyoung-Kuk, 2022. "Balancing risk: Generation expansion planning under climate mitigation scenarios," European Journal of Operational Research, Elsevier, vol. 297(2), pages 665-679.
    2. Haugen, Kjetil K., 1996. "A Stochastic Dynamic Programming model for scheduling of offshore petroleum fields with resource uncertainty," European Journal of Operational Research, Elsevier, vol. 88(1), pages 88-100, January.
    3. Douglas T. Gardner & J. Scott Rogers, 1999. "Planning Electric Power Systems Under Demand Uncertainty with Different Technology Lead Times," Management Science, INFORMS, vol. 45(10), pages 1289-1306, October.

    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:inm:ormnsc:v:30:y:1984:i:1:p:1-19. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    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.