Capacity Expansion of Power Generation Systems with Uncertainty in the Prices of Primary Energy Resources

Article Abstract:

In capacity expansion studies of power generation systems, the uncertainty in the prices of the primary energy resources is a major concern. The approach presented in this paper accounts for this uncertainty by mapping the probability distribution of the installed capacity for any given distribution of the fuel prices. Given the probability density function and the cumulative distribution of the installed capacity, a variety of performance measures is derived, including the expected value, the mode, and the variance of the installed capacity, and the expected total costs. Results are obtained analytically for a 2-unit system using a breakeven point analysis approach to find the optimal mix for any given set of fuel prices under the assumption of normally distributed primary energy prices. (Reprinted by Permission of Publisher.)

Management science, Business planning, Uncertainty, Energy, Price, Capacity Management

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Cost allocation and opportunity costs

Article Abstract:

Extensive use of allocated fixed costs is associated with their ability to serve as a substitute for opportunity costs that are difficult to calculate. Modeling a service department as an M-M-s-s queueing system is used to explore this hypothesis, with these results: the expected opportunity costs value equals both the optimal transfer price and the incremental productivity of capacity. Optimal transfer pricing policies are compared with the economic efficiency of transfer prices based on either variable cost or full cost.

Analysis, Accounting and auditing, Queuing theory, Cost accounting, Managerial accounting, Opportunity cost, Opportunity costs

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