ECON 4925 Autumn 2006 Resource Economics Seminar 4

1
ECON 4925 Autumn 2006 Resource Economics
Seminar 4

• Lecturer
• Finn R. Førsund

2
Seminar 4

• 1. Discuss the assumption of thermal systems only
  posing static optimization problems.
• Classify hydro and thermal power according to
  peak load and base load.
• Try also to discuss classification of
  individual plants of both types.
• 2. Analyse the management problem of a monopolist
  having hydro capacity but also windmill capacity.
  
• How will the problem change for the monopolist
  if the windmill capacity is owned by an
  independent price-taking operator?

3
Thermal only static optimisation?

• Start-up costs
• Close-down costs
• Minimum running time
• Minimum time closing down
• Minimum time before starting up
• Contracting primary fuel when fuel prices changes

4
Illustration start-up costs
ci,pi
p1,p3
a3
c
p2
c
eTh
Shoulder
Base
Peak
5
Mix of hydro and thermal with reservoir constraint
Period 2
Period 1
p2(x2)
p1(x1)
?2
p2
?1
?1
c
p1
c
C
d
D
a
B
A
Hydro energy
Thermal extensions
6
Monopoly with hydro and wind

• Problem formulation with hydro and wind

• Lagrangian
• First-order condition

7
Dominant hydro, wind fringe

• Problem formulation with hydro and wind fringe

• Lagrangian
• First-order condition

8
Monopolist with hydro and windmills
Period 2
Period 1
p2(x2)
p1(x1)
p2
p1
Wind
Wind
C
B
e1W
e2W
D
e1H
A
M
e2H
Total controllable inflow