Capacity Expansion

1
Capacity Expansion Location Planning with
MIS/GIS

• V Sridhar
• Rahul Pandey

2
Some uncomfortable questions

• Who else except engineering, finance and
  corporate planning are involved in evaluation of
  vendors for purchase of a new equipment/
  machinery for expanding capacity ?
• Do you view capacity enhancement as physical
  capacity addition (of equipment/cables/manpower/et
  c), or something more ?

Capacity planning can be integrated with
Productivity planning, Quality/Realiability
planning, Technology planning Operations
Maintenance planning to provide strategic
advantage
3
Long Term Planning
Load Forecasting
Location, Routing (Where)
Capacity Expansion (When, How much)
Technology / Availability / Efficiency (How)
System Average Cost, Marginal Cost, Reliability,
Flexibility
4
What else needs to be forecasted besides Load?

• Technology forecasting
• Keeping track of current future technology
  developments
• Appropriate technology-mix critical for enhancing
  the ability to reduce cost increase reliability
• Forecasting regulatory and environmental regimes
• Directly impact relative economics of
  technologies/fuels

5
Capacity enhancement strategy

• Sequence of specific capacity decisions over time
• Decisions in
• timing (when?)
• mode (how?)
• sizing (how much?)

6
Timing of capacity decisions

• Trade-offs in lead-demand v/s lag-demand
  approaches
• flexibility/reliability v/s high ROI
• idle capacity (low utilization) v/s loss of
  sales
• Decision depends on
• demand growth
• capital intensity
• technological evolution/progress
• competitors
• suppliers

7
Mode of capacity cushion

• Possible modes
• invest in plant machinery
• improve productivity
• Trade-offs to be considered
• speed of response v/s cost of capacity
• flexibility/reliability v/s risk of
  obsolescence/idleness

8
Amount of capacity addition

• Trade-offs to be considered
• cost of shortfall v/s cost of idle capacity
• economies of scale v/s diseconomies of scale
• static benefits v/s dynamic benefits

9
Capacity decisions build capability

• Capacity expansion is a series of investments in
  facilities/human-capital/knowledge

Options for expanding capacity
Invest in RD and OM efforts for increasing
efficiency/reliability
Add some generating units to existing or new
plants
Opportunities to gain better understanding of
technology and management systems (knowledge)
Capacity increase
New opportunities for future investments New
competitive options
Capacity increase New methods Reduced outage
durations Better ability to adopt new
technology, etc
10
Capacity strategy paradigm

• Capacity expansion is not merely addition, but
  development of capabilities
• Capacity decisions are integrally linked with
  Location, Technology-choice, and
  Performance-improvement decisions

11
Build a Capacity Expansion Location Model

• Your firm has forecasted peak demand to reach
  20500 MW in next 7 years in the geographical
  market of your interest. Existing installed
  capacity is 7100 MW. You are considering
  different options with respect to routing of
  lines, locations of sub-stations, types of
  technologies. Each option has different capital
  cost, running (OM) cost, and reliability
  estimates.
• Build a model to compare these options on
  multiple criteria like total cost, ROI, system
  reliability, peak-period shortage
• Define Variables
• Write Constraints and Objective

12
Build Capacity Expansion Location Model

• How can you incorporate following aspects of
  reality in your model
• Multiple year demands and investments
• Equipment availability characteristics (scheduled
  outages forced outages)
• Peak and base power demands in each year
• Various location choices for routing of lines and
  sub-stations
• Geographical resource availability (e.g. rivers,
  flows, topography, coal mines, gas pipelines,
  etc)
• Different financing options Budget constraints
  Manpower constraints/requirements Reliability
  needs etc.

13
Advantages of using a long term capacity
location planning model

• Optimal capacity expansion and location planning
• Optimal technology-capacity planning
• Long term optimization
• Long-term manpower planning (hence, yearly
  planning of promotions, recruitments, etc)
• Long-term equipment purchase contract planning
• Long-term system marginal costs (plant-wise and
  organization-wise)
• Long-term system reliability estimates