Models for determining least-cost investments in electricity supply

This paper reviews models used in the electricity supply industry for appraising investments, and presents some extensions. Quantities demanded and the prices of inputs and outputs are assumed to be exogenous, and the models search for investments having the lowest costs. Optimization is over several time periods. Typical decision variables considered are: choice of fossil, nuclear, single- or multipurpose hydro plant; locations of plants; directions of electrical energy transport (interconnection); timing of investments; replacement; and in all cases the optimum mode of system operation (including hydro storage policy). These variables may be analyzed by linear, non-linear, and dynamic programming as well as other methods. Both global models and optimization treatment of subproblems are reviewed.