Abstract

We present a method for valuing a power plant over a short term period using Monte Carlo simulation. The power plant valuation problem is formulated as a multi stage stochastic problem. We assume there are hourly markets for both electricity and the fuel used by the generator, and their prices follow some Ito processes. At each hour, the power plant operator must decide to run or not to run the unit so as to maximize expected profit. A certain lead time for commitment decision is necessary to start up a unit. The commitment decision, once made, is subject to physical constraints such as minimum uptime and downtime constraints. The generator''s startup cost, is also taken into account in our model. The Monte Carlo method is employed not only in forward moving simulation, but also backward moving recursion of dynamic programming. We demonstrate through numerical tests how the physical constraints affect a power plant value.

Meeting Name

32nd Annual Hawaii International Conference on Systems Sciences, 1999

Department(s)

Engineering Management and Systems Engineering

Keywords and Phrases

Ito Processes; Monte Carlo Methods; Monte Carlo Simulation; Backward Moving Recursion; Commitment Decision; Downtime Constraints; Dynamic Programming; Expected Profit; Forward Moving Simulation; Hourly Markets; Lead Time; Minimum Uptime; Multi Stage Stochastic Problem; Numerical Tests; Physical Constraints; Power Plant Operator; Power Plant Valuation; Power Plant Value; Power Plants; Power System Economics; Short Term Generation Asset Valuation; Short Term Period; Startup Cost

Document Type

Article - Conference proceedings

Document Version

Final Version

File Type

text

Language(s)

English

Rights

© 1999 Institute of Electrical and Electronics Engineers (IEEE), All rights reserved.

Publication Date

01 Jan 1999

Download

Full Text Link

Share

 
COinS