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On supply and network investment in power systems

Author

Listed:
  • Wim Ackooij

    (EDF Lab Paris-Saclay)

  • Nadia Oudjane

    (EDF Lab Paris-Saclay
    FiME (Laboratoire de Finance des Marchés de l’Energie (Dauphine, CREST, EDF R &D))

Abstract

In this work we discuss the question of investment in power systems wherein the need for flexibility would be a driving force for investments. The investment cost itself consists of a capital investment cost and an operational cost, wherein the latter evaluates the cost of operating the system for a given installed capacity. We argue that the operational cost is best dealt with through the use of the Lagrangian dual. Not only does the latter offer clear computational advantages, but it also naturally incorporates precise modelling of “flexibility”. The suggested formalism accounts for accurate models of complex systems. Even though the use of the Lagrangian entails an implicit convexification, we show that if sufficiently many units are to be invested in, the approximation gap vanishes. The laid out computational advantages specific to investment, on top of the well-known decomposition advantages of the Lagrangian, make the suggested formalism, we believe, a serious competitor to balance accuracy and computational performance as investment is concerned.

Suggested Citation

  • Wim Ackooij & Nadia Oudjane, 2024. "On supply and network investment in power systems," 4OR, Springer, vol. 22(4), pages 465-481, December.
    • Handle: RePEc:spr:aqjoor:v:22:y:2024:i:4:d:10.1007_s10288-024-00566-8
    DOI: 10.1007/s10288-024-00566-8
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