2016 INFORMS Annual Meeting Program

SD29

INFORMS Nashville – 2016

SD29 202A-MCC Energy Resource Valuation, Investment and Management Sponsored: Manufacturing & Service Oper Mgmt, Sustainable Operations Sponsored Session Chair: Owen Wu, Associate Professor, Indiana University, 1309 E. 10th Street, Bloomington, IN, 47405, United States, owenwu@indiana.edu 1 - Valuing Distributed Energy Resources In Electricity System Planning: Locational Benefits And Economies Of Unit Scale Jesse Jenkins, Massachusetts Institute of Technology, jessedj@mit.edu Distributed energy resources (DERs), including distributed generation, storage, and demand response, create new options for the provision of electricity services. Employing a new MILP formulation of the electricity capacity planning problem, this work evaluates the value of DERs and how they compete with conventional resources. Tradeoffs between “locational benefits” of DERs—e.g. loss mitigation, network capacity deferral, constraint mitigation—and economies of unit scale are considered, and cases where DERs are economically attractive contributors to a least-cost system mix are presented. 2 - Combined Heat And Power Production – Valuing Flexible Operation In An Uncertain Environment Christoph Weber, University Duisburg-Essen, christoph.weber@uni-due.de CHP provides an efficient means of converting fuels into power and heat. At the same time operation of CHP units is restricted by thermodynamical and technical constraints and subject to the double uncertainty of power prices and heat demand. The contribution explores the impact of operational flexibility both in the CHP unit (extraction condensing vs. backpressure turbines) and in the system configuration (back-up heat boiler). Analytical results are derived and a numerical application is presented. 3 - Economic Feasibility Of Compressed Air Energy Storage Under Market Uncertainty Reinhard Madlener, Director FCN, Full Professor of Energy Econ & Mgt, RWTH Aachen University, Mathieustrasse 10, Aachen, 52074, Germany, RMadlener@eonerc.rwth-aachen.de, Eide Hammann, Christoph Hilgers In light of increased levels of intermittent renewable electricity generation, energy storage is one option to balance supply and demand and thus to support the security of power supply. Compressed air energy storage (CAES) is a large-scale technology that has received considerable attention in recent years. As conventional CAES uses natural gas as an auxiliary fuel operators are exposed to price risks on two commodity markets. The more advanced adiabatic version, in contrast, features higher cycle efficiencies but at the downside of higher capital outlays. We apply real options analysis to investigate the economic viability of both technology variants in an uncertain market environment. 4 - Merchant Energy Trading In A Network Selva Nadarajah, University of Illinois at Chicago, selvan@uic.edu, Nicola Secomandi We formulate the merchant trading of energy on a network of storage and transport assets as a Markov decision problem. We overcome the intractability of this model by applying linear optimization in novel ways for approximate dynamic programming: (i) Iterative extensions of least squares Monte Carlo techniques based on value/continuation function approximations (V/CFAs) that are separable/non-separable and piecewise linear concave in the storage inventory levels; (ii) an extended reoptimization heuristic; and (iii) a perfect information dual bound based on a separable and linear VFA. We compare these methods on realistic natural gas instances, highlighting near-optimal methods.

4 - Operational Transparency With Investors William Schmidt, Cornell University, ws366@cornell.edu, Ananth Raman There is abundant evidence that operational disruptions are damaging to firm value. This depends not only on characteristics of the firm and its supply chain but also the level of operational transparency with investors. While the former has been widely studied, little is known about the implications of operational transparency. We examine this issue by taking advantage of an exogenous regulatory shock. A well-defined set of firms was excluded from fully complying with the new rules, creating a natural quasi-experiment which we exploit. Our research suggests that credible transparency with investors can alleviate over 50% of the loss in market value from operational disruption announcements. SD28 201B-MCC Energy Operations and Policy Sponsored: Manufacturing & Service Oper Mgmt Sponsored Session Chair: Ozge Islegen, Kellogg School of Management, Evanston, IL, Given the new policies, federal and state incentives, we show how net metering rules, rate plans and options to finance solar projects affect the adoption of residential solar PV. 2 - Remuneration Of Flexibility Using Operating Reserve Demand Curves: A Case Study Of Belgium Anthony Papavasiliou, CORE, UCL, tpapva@hotmail.com Yves Smeers We investigate an energy-only market design, referred to as operating reserve demand curves (ORDC), that rewards flexibility by adjusting the real-time energy price to a level that reflects the value of capacity under conditions of scarcity. We test the performance of the mechanism by developing a model of the Belgian electricity market. We verify that (i) none of the existing combined cycle gas turbines of the Belgian market can cover their investment costs, and (ii) the introduction of ORDC restores economic viability for most combined cycle gas turbines in the Belgian market. 3 - Robust Supply Function Equilibrium In Renewable Energy Markets Yuanzhang Xiao, Northwestern University, Evanston, IL, United States, yuanzhang.xiao@northwestern.edu, Chaithanya Bandi, Ermin Wei We consider a market where energy suppliers submit supply functions and bid to fulfill inelastic demand. Suppliers have renewable energy generation (with zero cost) and conventional energy generation (with variable costs). Each supplier performs robust optimization against worst-case realizations of its renewable energy generation and opponents’ costs of conventional energy generation. We analyze the resulting robust supply function equilibrium and its efficiency. 4 - An Analysis Of Demand Response Programs In The Wholesale Electricity Market Asligul Serasu Duran, Kellogg School of Management, Evanston, IL, 60208, United States, a-duran@kellogg.northwestern.edu, Baris Ata, Ozge Islegen This project explores the impact of the participation and compensation of demand response (DR) providers in the wholesale electricity market on the generation portfolio, electricity prices and social welfare. Specifically, we model a supply function equilibrium for generators and DR providers. Then, we analyze the change in the generation portfolio, and in the welfare of the market participants due to varying compensation rates of DR providers. United States, o-islegen@kellogg.northwestern.edu 1 - The Economics Of Residential Solar PV Adoption Ozge Islegen, Kellogg School of Management, o- islegen@kellogg.northwestern.edu, Basak Kalkanci

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