Hydropower Economics

The focus of HYDROPOWER ECONOMICS is to provide qualitative economic analyses of how to utilize stored water in a hydropower system with fixed generating capacities. The problem is dynamic because water used today to generate electric power may alternatively be used tomorrow. The distinctive feature of this book is to provide a social planning perspective on the optimal use of water. This is a prerequisite for understanding and evaluating newly-established electricity markets.

The dynamic nature of hydropower production, the high number of units involved, and the inherent stochastic nature of inflow of water make optimization problems quite difficult technically to solve. In the engineering literature complex stochastic dynamic programming models are used and solution algorithms developed for real-life data, with numerical solutions provided. In this book a much more simplified mathematical approach suited to obtain qualitative conclusions is followed. Standard nonlinear programming models for discrete time are used and the Kuhn – Tucker conditions employed extensively for qualitative interpretations. A special graphical presentation, termed a bathtub diagram, is developed for two-period illustration.

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