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Integrated Resource Planning with Environmental Costs in Developing Countries

Chitru S. Fernando, Paul R. Kleindorfer and Mohan Munasinghe

Year: 1994
Volume: Volume15
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No3-6
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Abstract:
This paper presents an integrated approach to dealing with the twin problems of environmental degradation and capital costs associated with the rapid expansion of electric power in developing countries. The integrated resource planning framework developed here calls for a careful balancing of supply and demand side options. Interruptible technologies are an important option in those developing countries where capital is scarcer and shortage costs are higher. When environmental costs of conventional generating technologies are included, the balance shifts even further in favor of demand side measures. This integrated perspective at the planning phase must be complemented by pricing policies that accurately reflect the cost of providing electric power, and organization structures that provide strong incentives for efficient operation.



Multi-Period VaR-Constrained Portfolio Optimization with Applications to the Electric Power Sector

Paul R. Kleindorfer and Lide Li

Year: 2005
Volume: Volume 26
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No1-1
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Abstract:
This paper considers the optimization of portfolios of real and contractual assets, including derivative instruments, subject to a Value-at-Risk (VaR) constraint, with special emphasis on applications in electric power. The focus is on translating VaR definitions for a longer period of time, say a year, to decisions on shorter periods of time, say a week or a month. Thus, if a VaR constraint is imposed on annual cash flows from a portfolio, translating this annual VaR constraint into appropriate risk management/VaR constraints for daily, weekly or monthly trades within the year must be accomplished. The paper first characterizes the multi-period VaR-constrained portfolio problem in the form Max {E � kV} subject to a set of separable constraints over the decision variables (the level of assets of different instruments contained in the portfolio), where E and V are, respectively, the expected value and variance of multi-period cashflows from operations covered by the portfolio. Then, assuming the distribution of multi-period cashflows satisfies a certain regularity condition (which is a generalization of the standard Gaussian assumption underlying VaR), we derive computationally efficient methods for solving this problem that take the form of the standard quadratic programming formulations well-known in financial portfolio analysis.





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