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The Problems of Peak Loads and Inventories

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  • D.T. Nguyen

Abstract

Following their contribution to the debate on public utility, peak load, and electricity pricing, M.A. Crew and P.R. Kleindorfer published a note giving a set of conditions for efficient allocation of desired outputs, over n subperiods, among m plants, having constant average running and capacity costs. This paper extends their framework to accommodate the case in which the storing of products over the off-peak periods is feasible and derives the new set of optimal conditions. It is shown that, with storage facilities, fewer plants will in general be used and peak price will be lower than otherwise and that considerable welfare benefits can be obtained.

Suggested Citation

  • D.T. Nguyen, 1976. "The Problems of Peak Loads and Inventories," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 242-248, Spring.
    • Handle: RePEc:rje:bellje:v:7:y:1976:i:spring:p:242-248
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    Cited by:

    1. Çam , Eren & Lencz, Dominic, 2020. "Pricing short-term gas transmission capacity: A theoretical approach to understand the diverse effects of the multiplier system," EWI Working Papers 2020-2, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    2. Matthew Oliver & Charles Mason & David Finnoff, 2014. "Pipeline congestion and basis differentials," Journal of Regulatory Economics, Springer, vol. 46(3), pages 261-291, December.
    3. Horsley, Anthony & Wrobel, Andrew J., 2002. "Efficiency rents of pumped-storage plants and their uses for operation and investment decisions," Journal of Economic Dynamics and Control, Elsevier, vol. 27(1), pages 109-142, November.
    4. Kun Li & Joseph D. Cursio & Yunchuan Sun, 2018. "Principal Component Analysis of Price Fluctuation in the Smart Grid Electricity Market," Sustainability, MDPI, vol. 10(11), pages 1-16, November.
    5. Oliver, Matthew E., 2019. "Pricing flexibility under rate-of-return regulation: Effects on network infrastructure investment," Economic Modelling, Elsevier, vol. 78(C), pages 150-161.
    6. Li, Kun & Cursio, Joseph D. & Jiang, Mengfei & Liang, Xi, 2019. "The significance of calendar effects in the electricity market," Applied Energy, Elsevier, vol. 235(C), pages 487-494.
    7. Çam, Eren & Lencz, Dominic, 2021. "Pricing short-term gas transmission capacity: A theoretical approach to understand the diverse effects of the multiplier system," Energy Economics, Elsevier, vol. 95(C).
    8. John G. Riley & Charles R. Scherer, 1976. "Optimal Water Pricing with Cyclical Supply and Demand," UCLA Economics Working Papers 077, UCLA Department of Economics.

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