Modelling Uncertainty

in Electricity Capacity Planning

Anne Ku

Thesis submitted to the University of London

for the degree of Doctor of Philosophy

London Business School

February 1995
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 ABSTRACT

Capacity planning has always been subject to major uncertainties, but privatisation of the
U.K. electricity supply industry (ESI) has introduced the additional risks of business and
market failure. To meet these broader modelling requirements, two radically different
approaches characterised by model synthesis and flexibility are investigated.

Ideally, by using more than one technique, model synthesis should be more capable of
meeting the conflicting criteria of comprehensibility and comprehensiveness. The
noticeable trend of building bigger energy models supports this view in practice. A case
study based modelling experiment was conducted to compare replications of traditional
approaches with prototypes of synthesis. The conclusion from this is that the pursuit of
greater model comprehensiveness through model synthesis is an elusive and ultimately
impractical objective.

Rather than rigorous modelling for completeness, flexibility introduces an entirely different
treatment of uncertainty. Flexibility has received much attention lately, but its usefulness
is under-researched in modelling uncertainty for this context. In this respect, flexibility is
studied 1) as a decision criterion, 2) as a feature of the modelling approach, and 3) in
contrast to robustness.

Although intuitively appealing, flexibility is a vague and multi-faceted concept that

requires much clarification before further application. A cross disciplinary review
identifies its close relationships with more established concepts, the conditions under which
it is useful, and the necessary elements in its definition. These elements translate into
indicators for measuring and modelling flexibility. Practical guidelines for the
operationalisation, structuring, and assessment of flexibility are developed from this
conceptual framework and supported by examples specific to the UK ESI.

The seemingly feasible answer of model synthesis is fraught with conceptual and
operational difficulties. The less obvious concept of flexibility offers a more promising
and useful framework. Instead of modelling uncertainty for completeness, this thesis
promotes modelling flexibility for contingency.

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 To my parents,

James and Lucy,

complementary but not always compatible

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 ACKNOWLEDGEMENTS

Writing this thesis was like putting together a big jigsaw puzzle. Without the clues along
the way, the final picture might have appeared much later and perhaps fuzzier. I would
like to thank the kind individuals, who supplied these clues and some of the missing pieces.

First of all, I thank my supervisor Derek Bunn, for his patience and wisdom in guiding me
to the final end and his sustained interest as my thesis evolved. I would also like to thank
Kiriakos Vlahos for suggesting the idea of flexibility in the first place and his considerable
help and feedback on various stages of my research.

I would like to thank the following individuals for intellectual input: Hans Christian
Reinhardt for stimulating discussions on the concept of flexibility and my research as a
whole; François Longin for application of flexibility and robustness; Jonathan Levie and
Mike Staunton for detailed comments on writing and content; Isaac Dyner for feedback on
model synthesis; and Stephen Watson for clarification of the initial literature review on
flexibility.

On financial support, I acknowledge the PhD Programme’s generous contribution towards

my tuition in the early years and fees for conferences (Kiel, DC, and Berlin). I am also
grateful for the support of the Overseas Research Scholarship, Decision Sciences Teaching
Scholarship, Energy Scholarship, and Decision Sciences Faculty for conferences
(Lancaster, Cologne, and York).

I would like to thank the LBS Library staff, in particular, John Hall and Lynne Powell for
inter-library loans. I am also deeply grateful to my friend Zakia Mehdi for lending me her
notebook computer in the final stages and Eduardo Ayrosa for configuring it to my
specifications. I also acknowledge the advice and encouragement of other colleagues and
friends who have shared the PhD experience with me.

Finally, I thank Dave Woodhouse, for emotional support.

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 Chance favours the prepared mind.

- Louis Pasteur (1822 - 1895)

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 TABLE OF CONTENTS

Abstract ........................................................................................ 3

Acknowledgements ........................................................................................ 5

Table of Contents ........................................................................................ 7

List of Tables ........................................................................................ 17

List of Figures ........................................................................................ 21

Chapter 1 Preface and Overview

1.1 Motivation ........................................................................................ 25

1.2 Research Questions....................................................................................... 27

1.3 Research Methodology.................................................................................. 28

1.4 Organisation of Thesis .................................................................................. 29

Chapter 2 Introduction: Uncertainties in Power Generation

2.1 Introduction ........................................................................................ 37

2.2 Electricity ........................................................................................ 37

2.3 Industry Structure ........................................................................................ 38

2.3.1 The Privatised UK Electricity Supply Industry..................................... 39

2.3.2 ESI of Other Countries ........................................................................ 46

2.4 Background Developments............................................................................ 48

2.5 Capacity Planning ........................................................................................ 50

2.6 “Uncertainty” and Types of Uncertainty ........................................................ 53

2.7 Areas of Uncertainty..................................................................................... 60

2.7.1 Plant Economics.................................................................................. 61

2.7.2 Fuel ........................................................................................ 64

2.7.3 Electricity Demand.............................................................................. 66

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2.7.4 Technology ........................................................................................ 67

2.7.5 Financing Requirements ...................................................................... 71

2.7.6 Market ........................................................................................ 72

2.7.7 Political and Regulatory ...................................................................... 73

2.7.8 Environment........................................................................................ 75

2.7.9 Public ........................................................................................ 77

2.8 Conclusions ........................................................................................ 78

Part One Model Synthesis for Completeness

Chapter 3 Approaches to Capacity Planning

3.1 Introduction ........................................................................................ 83

3.2 Optimisation ........................................................................................ 84

3.2.1 Linear Programming ........................................................................... 84

3.2.2 Decomposition Methods ...................................................................... 88

3.2.3 Dynamic Programming........................................................................ 90

3.2.4 Stochastic Programming...................................................................... 93

3.3 Simulation ........................................................................................ 96

3.3.1 System Dynamics................................................................................ 97

3.3.2 Scenario Analysis................................................................................ 98

3.3.3 Sensitivity Analysis............................................................................. 102

3.3.4 Probabilistic and Risk Analysis ........................................................... 103

3.4 Decision Analysis ........................................................................................ 105

3.4.1 A Classic Application - the Over and Under Model.............................. 108

3.4.2 An Extension of the Baughman-Joskow Model..................................... 111

3.4.3 Multiple Objectives Under Uncertainty ................................................ 112

3.4.4 Multi-Attribute, Objectives Hierarchy.................................................. 114

3.5 “Model Synthesis”........................................................................................ 116

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3.5.1 Commercially Available Software........................................................ 116

3.5.2 Decision Analysis with Optimisation.................................................... 117

3.5.3 Scenario Generation ............................................................................ 120

3.5.4 Decision Analysis as a Framework....................................................... 122

3.6 Conclusions ........................................................................................ 124

Chapter 4 The Pursuit of Model Synthesis

4.1 Introduction ........................................................................................ 133

4.2 Experimental Protocol................................................................................... 134

4.3 Model Replication and Evaluation................................................................. 135

4.3.1 Rationale ........................................................................................ 135

4.3.2 Method of Replication ......................................................................... 136

4.3.3 Method of Model Evaluation and Comparison...................................... 137

4.3.4 Evaluation Criteria .............................................................................. 138

4.4 Case Study Based Modelling Experiment ...................................................... 141

4.4.1 Case Study ........................................................................................ 141

4.4.2 Stage 1: Three Archetypal Modelling Approaches ............................... 145

4.4.3 Comparison of Approaches.................................................................. 147

4.5 Model Synthesis ........................................................................................ 152

4.5.1 Rationale ........................................................................................ 152

4.5.2 Conceptualisation of Model Synthesis.................................................. 154

4.5.3 Decision Analysis Framework.............................................................. 159

4.5.4 Model of Model................................................................................... 161

4.5.4.1 Introduction ............................................................................... 161

4.5.4.2 Methodology.............................................................................. 162

4.5.4.3 Conclusions ............................................................................... 167

4.5.5 Second Stage Conclusions ................................................................... 168

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4.6 Motivation for Flexibility.............................................................................. 171

4.6.1 Completeness and “Model Unease”...................................................... 171

4.6.2 “Coping” with Uncertainty .................................................................. 173

4.7 Conclusions ........................................................................................ 174

Appendix A Pilot Study 1:

A Comparison of the Economics of Nuclear, Coal, and Gas Power Plant

Using Sensitivity Analysis and Risk Analysis

A.1 Introduction ........................................................................................ 177

A.2 Modelling Approach ..................................................................................... 179

A.3 The Cost of Electricity Generation ................................................................ 181

A.3.1 Range of Levelised Costs .................................................................... 181

A.3.2 Variability in Cost Components........................................................... 183

A.3.3 Contribution to Cost............................................................................ 183

A.4 Major Components of Cost ........................................................................... 185

A.4.1 Assumptions ....................................................................................... 186

A.4.2 Ranges of Values ................................................................................ 187

A.4.3 Investment ........................................................................................ 188

A.4.4 Operations and Maintenance................................................................ 189

A.4.5 Fuel ........................................................................................ 190

A.4.6 Carbon Tax ........................................................................................ 192

A.4.7 Efficiency ........................................................................................ 194

A.4.8 Load Factor ........................................................................................ 194

A.4.9 Escalation Rates.................................................................................. 195

A.4.10 Life ........................................................................................ 196

A.4.11 Discount Rate ..................................................................................... 197

A.4.12 Consolidating the Range...................................................................... 199

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A.5 Sensitivity Analysis....................................................................................... 200

A.5.1 Calculation Method ............................................................................. 201

A.5.2 UK Parameters.................................................................................... 202

A.5.3 Sensitivity to Range............................................................................. 206

A.6 Risk Analysis ........................................................................................ 208

A.6.1 Methodology ....................................................................................... 209

A.6.2 Revised Values.................................................................................... 210

A.6.3 Nuclear ........................................................................................ 211

A.6.4 Coal ........................................................................................ 213

A.6.5 Gas ........................................................................................ 215

A.6.6 Trade-off Curves................................................................................. 217

A.6.7 Impact of Carbon Tax ......................................................................... 219

A.7 Summary and Conclusions............................................................................ 221

Appendix B Stage One: Three Archetypal Approaches: Data

Consolidation, Model Replication, and Evaluation

B.1 Data Consolidation ....................................................................................... 227

B.2 Deterministic Approach ................................................................................ 236

B.2.1 Description of Approach...................................................................... 236

B.2.2 Description of Replication ................................................................... 237

B.2.3 Results of Replication.......................................................................... 245

B.2.4 Conclusions and Extensions................................................................. 249

B.3 Probabilistic Approach ................................................................................. 250

B.3.1 Description of Approach...................................................................... 250

B.3.2 Replication and Results ....................................................................... 252

B.3.3 Extensions of Probabilistic Approach................................................... 256

B.4 Decision Analytic Approach.......................................................................... 257

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B.4.1 Description of Approach ..................................................................... 257

B.4.2 Three Prototypes ................................................................................. 259

B.4.3 Marginal Cost Analysis....................................................................... 260

Appendix C A Conceptualisation of Model Synthesis

C.1 Definitions ........................................................................................ 263

C.2 Synergies Between Techniques...................................................................... 264

C.2.1 Decision and Uncertainty Nodes .......................................................... 264

C.2.2 Sensitivity Analysis, Risk Analysis, Decision Analysis......................... 266

C.3 Structuring ........................................................................................ 268

C.3.1 Selection of Components ..................................................................... 268

C.3.2 Ordering ........................................................................................ 270

C.3.3 Linkage ........................................................................................ 271

C.4 Weak and Strong Forms ............................................................................... 274

C.5 Strategies for Synthesis................................................................................. 275

C.5.1 Modular ........................................................................................ 275

C.5.2 Hierarchical ........................................................................................ 275

C.5.3 Evolutionary ....................................................................................... 276

C.5.4 Other Approaches ............................................................................... 277

Part Two Flexibility for Uncertainty

Chapter 5 Cross Disciplinary Review

5.1 Introduction ........................................................................................ 281

5.2 Energy Sector and Electricity Planning.......................................................... 282

5.3 Economics ........................................................................................ 284

5.4 Corporate Planning / Business Strategy......................................................... 285

5.5 Labour Markets ........................................................................................ 286

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5.6 Technology / Information Systems / Telecommunications .............................. 287

5.7 Manufacturing ........................................................................................ 288

5.8 Other Areas ........................................................................................ 290

5.9 Observations and Conclusions....................................................................... 290

Chapter 6 Conceptual Framework

6.1 Introduction ........................................................................................ 295

6.2 Conceptual Analysis ..................................................................................... 296

6.3 Flexibility and Robustness ............................................................................ 297

6.3.1 Two Types of Flexibility ..................................................................... 297

6.3.2 Robustness ........................................................................................ 298

6.3.3 Flexibility versus Robustness............................................................... 300

6.4 Flexibility versus Optimality as a Decision Criterion ..................................... 306

6.5 Robustness, Risk, and Regret ........................................................................ 306

6.6 Commitment, Confidence, and Flexibility ...................................................... 308

6.7 The Right But Not the Obligation.................................................................. 309

6.8 Uncertainty and Flexibility............................................................................ 311

6.9 Conditions Under Which Flexibility is Useful ................................................ 313

6.10 Downside of Flexibility................................................................................. 315

6.11 Necessary Elements to Define Flexibility....................................................... 317

6.12 The Concept of Favourability........................................................................ 319

6.13 Operationalising Flexibility ........................................................................... 320

6.14 Conclusions ........................................................................................ 324

Chapter 7 Measuring Flexibility

7.1 Introduction ........................................................................................ 327

7.2 Indicators of Flexibility................................................................................. 330

7.3 Expected Value Measures ............................................................................. 335

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7.3.1 Relative Flexibility Benefit .................................................................. 335

7.3.1.1 Single Investment: Flexible vs Inflexible..................................... 336

7.3.1.2 Comparing Investments: Flexibility vs Favourability .................. 340

7.3.2 Normalised Flexibility Measure........................................................... 343

7.3.3 Expected Value of Information ............................................................ 348

7.3.4 Towards an Improved EV Measure ..................................................... 351

7.4 Entropic Measures........................................................................................ 355

7.4.1 For Entropy ........................................................................................ 356

7.4.2 Decision View (Pye, 1978) .................................................................. 360

7.4.3 Systems View (Kumar, 1987).............................................................. 363

7.4.4 Against Entropy .................................................................................. 365

7.5 Comparison of Entropic and Expected Value Measures ................................. 370

7.6 Conclusions ........................................................................................ 372

Chapter 8 Modelling Flexibility

8.1 Introduction ........................................................................................ 377

8.2 Structuring ........................................................................................ 378

8.2.1 Decision Analytic Framework.............................................................. 378

8.2.2 Two Stage Decision Sequence ............................................................. 381

8.2.3 Local and External Events................................................................... 382

8.3 Assessment ........................................................................................ 384

8.3.1 Simple Problems ................................................................................. 385

8.3.2 Complex Problems .............................................................................. 386

8.4 Capacity Planning in the UK Electricity Supply Industry............................... 388

8.4.1 Plant Economics.................................................................................. 389

8.4.2 Pool Price ........................................................................................ 393

8.5 Operationalising Strategies ........................................................................... 396

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8.5.1 Partitioning, Sequentiality, Staging ...................................................... 396

8.5.2 Postponement and Deferral .................................................................. 401

8.5.3 Diversity ........................................................................................ 403

8.6 Conclusions ........................................................................................ 406

Appendix D Flexibility and Robustness: Response to Demand Uncertainty

by Over- and Under-Capacity

D.1 Introduction ........................................................................................ 409

D.2 Simple Example: no lead time, demand = supply, planned = actual levels....... 410

D.2.1 Proportional Cost ................................................................................ 412

D.2.2 Flexibility ........................................................................................ 413

D.2.3 Robustness ........................................................................................ 413

D.2.4 Flexibility versus Robustness............................................................... 414

D.2.5 Optimal Policy Iopt ............................................................................... 414

D.2.6 Special Cases ...................................................................................... 414

D.2.7 Relative Costs ..................................................................................... 415

D.3 Extensions of Simple Example ...................................................................... 416

D.3.1 Levels of I ........................................................................................ 416

D.3.2 Cost of Not Meeting Demand Cd .......................................................... 417

D.3.3 Effect of Lead Time T ......................................................................... 417

D.3.4 Risk Attitude....................................................................................... 418

D.3.5 Levels of Qmin, Qmax with respect to Dmin, Dmax...................................... 419

D.3.6 Forecasted Demand versus Actual Demand.......................................... 419

D.3.7 Errors in Forecasting, Modelling, and Planning .................................... 421

D.4 Applications by Further Examples................................................................. 421

D.4.1 Example 1: Current and Savings Accounts.......................................... 422

D.4.2 Example 2: Buying versus Renting...................................................... 423

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D.5 The UK Electricity Supply Industry .............................................................. 424

D.6 Conclusions ........................................................................................ 426

Chapter 9 Conclusions

9.1 Main Themes ........................................................................................ 429

9.2 Research Questions and Answers.................................................................. 433

9.3 Research Contributions................................................................................. 441

9.4 Further Research ........................................................................................ 444

References ........................................................................................ 449

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 LIST OF TABLES

Chapter 1
Table 1.1 Research Questions and Methodology ............................................................36

Chapter 2
Table 2.1 Privatised Structure in England and Wales ....................................................40
Table 2.2 Comparison of Industry Structures................................................................46
Table 2.3 Evolution of Electricity Planning in the USA ..................................................52
Table 2.4 Important Factors in Capacity Planning..........................................................61
Table 2.5 Fuel/Technology Comparisons ......................................................................69
Table 2.6 Model Requirements for Capacity Planning....................................................79

Part One Model Synthesis for Completeness

Chapter 3
Table 3.1 Arguments For and Against Risk Analysis....................................................105
Table 3.2 Steps in Decision Analysis ...........................................................................106
Table 3.3 Pros and Cons of Decision Analysis .............................................................108
Table 3.4 Critique of Techniques .................................................................................126

Chapter 4
Table 4.1 Model Evaluation and Comparison Criteria ..................................................139
Table 4.2 Unprotected but Dominant Utility: National Power .......................................142
Table 4.3 Protected but Competitive Utility .................................................................143
Table 4.4 Unprotected but Encouraged Utility..............................................................144
Table 4.5 Comparison With Respect to Evaluation Criteria..........................................149
Table 4.6 Summary of Approaches..............................................................................150
Table 4.7 Major Concerns in Model Synthesis .............................................................155
Table 4.8 Structuring Issues ........................................................................................157
Table 4.9 Dependent Variables in the Reduced Model ..................................................163
Table 4.10 Independent Variables in the Reduced Model..............................................164
Table 4.11 Difficulties of Model Synthesis Implementation ..........................................169
Table 4.12 Completeness and “Unease” .......................................................................172

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Appendix A
Table A.1 Consolidated Range .................................................................................... 200
Table A.2 UK Parameters ........................................................................................... 203
Table A.3 Base Costs for the UK ................................................................................ 204
Table A.4 Simulation Parameters for Nuclear.............................................................. 212
Table A.5 Simulation Values for Coal ......................................................................... 214
Table A.6 Simulation Values for Gas .......................................................................... 216

Appendix B
Table B.1 Sources of Information................................................................................ 229
Table B.2 Status of Plant ............................................................................................ 231
Table B.3 Existing Plant as at July 1993 ..................................................................... 232
Table B.4 Summary of All Plant in England and Wales NGC System as at July 1993 .. 236
Table B.5 Input Files to ECAP.................................................................................... 255
Table B.6 Output Files from ECAP............................................................................. 256

Part Two Flexibility for Uncertainty

Chapter 5
Table 5.1 Uses of Flexibility ....................................................................................... 292

Chapter 6
Table 6.1 Flexibility and Robustness ........................................................................... 297
Table 6.2 Gerwin’s (1993) Methods of Coping With Uncertainty................................. 304
Table 6.3 Response to Areas of Uncertainties in Chapter 2 .......................................... 304
Table 6.4 Mandelbaum (1978) .................................................................................... 315

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Chapter 7
Table 7.1 Elements and Indicators of Flexibility...........................................................335
Table 7.2 Annual Costs 336
Table 7.3 Comparison of Expected Value Measures.....................................................353
Table 7.4 Equal Entropies for Different Number of States............................................369

Chapter 8
Table 8.1 Problem Categories and Expected Value Measures .......................................386
Table 8.2 Areas of Uncertainties Affecting Costs and Revenues ...................................388

Appendix D
Table D.1 Terminology and Notations .........................................................................411
Table D.2 Lead Time and Cost of Not Meeting Demand ..............................................418
Table D.3 Preferences with respect to Risk Attitude when P(Dt > Qmax) >0 ................419
Table D.4 Conditions for Robustness and Flexibility....................................................420

Chapter 9
Table 9.1 Research Questions and Answers .................................................................435
Table 9.2 Flexibility ..............................................................................................441

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 LIST OF FIGURES

Chapter 1
Figure 1.1 Organisation of Thesis ..................................................................................30

Chapter 2
Figure 2.1 Privatised Industry Structure in the UK........................................................40
Figure 2.2 Spiral of Impossibility .................................................................................54

Part One Model Synthesis For Completeness

Chapter 3
Figure 3.1 Decomposition Methods................................................................................89
Figure 3.2 Scenario Planning Process ..........................................................................100
Figure 3.3 The Over and Under Model........................................................................110
Figure 3.4 Matrix Model of Decisions and Outcomes..................................................112
Figure 3.5 Decision Tree in SMARTS ........................................................................114
Figure 3.6 Technology Choice Decision Tree ...............................................................115
Figure 3.7 Technology Choice Objectives Hierarchy ....................................................116
Figure 3.8 Optimisation Grid.......................................................................................118
Figure 3.9 Decision Tree with Optimisation Algorithm.................................................120
Figure 3.10 Scenario / Decision Analysis .....................................................................121
Figure 3.11 Decision Tree of New Technology Evaluation ...........................................123
Figure 3.12 SMARTE Methodology ............................................................................124
Figure 3.13 OR Techniques .........................................................................................130

Chapter 4
Figure 4.1 Experimental Protocol ................................................................................135

Appendix A
Figure A.1 Uncertainty Modelling................................................................................181
Figure A.2 Horizontal Analysis of Value Ranges .........................................................182
Figure A.3 Vertical Analysis of Cost Contribution .......................................................184

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Figure A.4 Factors Influencing Cost ............................................................................ 185
Figure A.5 Carbon Tax Calculations for Coal-fired Plants ........................................... 193
Figure A.6 Contribution to Final Cost ......................................................................... 204
Figure A.7 UK Coal vs Nuclear Trade-off Curves with $3 Carbon Tax ....................... 205
Figure A.8 UK Coal vs Nuclear Trade-off Curves with $10 Carbon Tax...................... 206
Figure A.9 Coal ............................................................................................. 207
Figure A.10 Nuclear ............................................................................................. 208
Figure A.11 Risk Profiles for Nuclear ......................................................................... 213
Figure A.12 Risk Profiles for Coal .............................................................................. 215
Figure A.13 Risk Profiles for Gas ............................................................................... 217
Figure A.14 Trade-off Curves for Coal, Nuclear, and Gas (no tax) .............................. 218
Figure A.15 Most Likely Case..................................................................................... 218
Figure A.16 Most Expensive Case............................................................................... 219
Figure A.17 Carbon Tax on Coal ................................................................................ 220
Figure A.18 Carbon Tax on Gas ................................................................................. 220
Figure A.19 Modelling Directions................................................................................ 222

Appendix B
Figure B.1 Load Duration Curves for Demand Uncertainty.......................................... 239
Figure B.2 Scenario Generation................................................................................... 240
Figure B.3 Replication of the Probabilistic Approach................................................... 253
Figure B.4 Prototype One: Single Project.................................................................... 260
Figure B.5 Prototype Two: Marginal Cost Analysis .................................................... 261

Appendix C
Figure C.1 Similarities of Techniques.......................................................................... 265
Figure C.2 Risk Analysis and Decision Analysis.......................................................... 267
Figure C.3 Types of Model Linkages........................................................................... 272

Part Two Flexibility for Uncertainty

Chapter 6
Figure 6.1 Conceptual Framework............................................................................... 295

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Chapter 7
Figure 7.1 Hobbs’ Example.........................................................................................337
Figure 7.2 Expected Conditions ...................................................................................339
Figure 7.3 Investment Y 341
Figure 7.4 General Structure of Normalisation.............................................................345
Figure 7.5 Expected Conditions ...................................................................................346
Figure 7.6 Schneeweiss and Kühn................................................................................347
Figure 7.7 EVPI ..............................................................................................350
Figure 7.8 Relative Flexibility Benefit..........................................................................350
Figure 7.9 Deterministic EV ........................................................................................352
Figure 7.10 Notation ..............................................................................................357
Figure 7.11 Maximum Entropy as a Function of States ................................................358
Figure 7.12 Entropy and Standard Deviation................................................................358
Figure 7.13 State Discrimination .................................................................................359
Figure 7.14 Decomposition Rule..................................................................................360
Figure 7.15 Decision Tree Transformation for Entropic Treatment...............................366

Chapter 8
Figure 8.1 Decision Tree of Generic Example ..............................................................383
Figure 8.2 Influence Diagram of Generic Example .......................................................384
Figure 8.3 Hirst’s (1989) Example ..............................................................................387
Figure 8.4 Electricity Planning Example ......................................................................389
Figure 8.5 Plant Economics Influence Diagram............................................................391
Figure 8.6 Plant Economics Decision Tree...................................................................392
Figure 8.7 Pool Price Influence Diagram......................................................................394
Figure 8.8 Pool Price Decision Tree.............................................................................395
Figure 8.9 Partitioning ..............................................................................................397
Figure 8.10 Sequentiality and Staging..........................................................................398
Figure 8.11 Flexibility by Plant Lives ..........................................................................399
Figure 8.12 Postponement and Deferral Decision Tree .................................................402
Figure 8.13 Deferral with respect to Market and Plant Uncertainty...............................403
Figure 8.14 Diversity Influence Diagram .....................................................................404
Figure 8.15 Diversity Decision Tree ............................................................................405

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Appendix D
Figure D.1 Costs of holding and production: Ch and Cp ............................................. 412
Figure D.2 Relationship between Iopt and Ch, Cp ........................................................ 416
Figure D.3 Cost of extra production Cxp ..................................................................... 420

Chapter 9
Figure 9.1 Research Messages..................................................................................... 434

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