Peak-load pricing and capacity planning with demand and supply uncertainty

Journal Article · · Bell J. Econ.; (United States)

DOI:https://doi.org/10.2307/3003545· OSTI ID:5866259

Chao, H P

The peak-load pricing problem has been discussed quite extensively in the literature. Central to the problem is the choice of output capacity and price for a basically nonstorable commodity such as electricity. This article considers both uncertain demand and uncertain capacity simultaneously in a simple model and generalizes earlier analyses, notably in two respects. First, the author examines the demand uncertainty in a more-general framework within which previous specifications of demand uncertainty can be seen as special cases. Second, he takes explicit account of the random availability of the installed capacity. It is shown that the optimal price is a weighted average of marginal operating costs and the marginal outage cost. 20 references, 1 figure.

• Research Organization: Electric Power Research Inst., Palo Alto, CA
• OSTI ID: 5866259
• Journal Information: Bell J. Econ.; (United States), Journal Name: Bell J. Econ.; (United States) Vol. 14:1; ISSN BJECD
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200* -- Energy Planning & Policy-- Economics & Sociology
296000 -- Energy Planning & Policy-- Electric Power
AVAILABILITY
DEMAND FACTORS
ECONOMIC ANALYSIS
ECONOMICS
ELECTRIC POWER
PEAK-LOAD PRICING
POWER
PRICES