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Multi-horizon stochastic programming

Author

Listed:
  • Michal Kaut
  • Kjetil Midthun
  • Adrian Werner
  • Asgeir Tomasgard
  • Lars Hellemo
  • Marte Fodstad

Abstract

Infrastructure-planning models are challenging because of their combination of different time scales: while planning and building the infrastructure involves strategic decisions with time horizons of many years, one needs an operational time scale to get a proper picture of the infrastructure’s performance and profitability. In addition, both the strategic and operational levels are typically subject to significant uncertainty, which has to be taken into account. This combination of uncertainties on two different time scales creates problems for the traditional multistage stochastic-programming formulation of the problem due to the exponential growth in model size. In this paper, we present an alternative formulation of the problem that combines the two time scales, using what we call a multi-horizon approach, and illustrate it on a stylized optimization model. We show that the new approach drastically reduces the model size compared to the traditional formulation and present two real-life applications from energy planning. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Michal Kaut & Kjetil Midthun & Adrian Werner & Asgeir Tomasgard & Lars Hellemo & Marte Fodstad, 2014. "Multi-horizon stochastic programming," Computational Management Science, Springer, vol. 11(1), pages 179-193, January.
    • Handle: RePEc:spr:comgts:v:11:y:2014:i:1:p:179-193
    DOI: 10.1007/s10287-013-0182-6
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    References listed on IDEAS

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