EMRG 1994-1995 Annual Report
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- Research Areas
The Energy Modelling Research Group (EMRG) has completed its second full year of operation. Again its activities have been made possible by the generous support of Trans Power (NZ) Ltd and the Electricity Corporation of New Zealand (ECNZ).
This year has been a period of consolidation and, in some instances, completion of research projects. Yang Miao's thesis was completed and successfully examined. We congratulate her as the first EMRG doctoral graduate. The group continues with its three academic staff members, Grant Read (EMRG research team leader), John George (EMRG administrator) and Bruce Lamar from the Department of Management. We still have six doctoral students and two research assistants, as detailed in people.
We continue to enjoy the input of other people from inside and outside the university, and visitors to the Department. Members of the group attended several local conferences and overseas conferences in Ann Arbor, London, Los Angeles, and Singapore, as well as visiting overseas groups working in the energy field. We are confident that these links have both strengthened the work in EMRG and also built our reputation internationally.
In Reserach Areas we describe our current research activities and list our research publications. In order to provide a complete picture of the group's activities, we have not differentiated between those projects funded from the scholarship money provided jointly by ECNZ and Trans Power, and those which have been undertaken under contract. However, research contract reports for specific clients have not been listed, for reasons of confidentiality. We are in the process of establishing a formal working paper series which will make past and present work more readily available in a consistent format.
The main thrust of this work has been Yang Miao's thesis research on improved Dual Dynamic Programming (DDP) techniques.
Miao's research has shown that the modified one reservoir model which takes account of inflow correlation explicitly might perform about 5.5% better, in fuel/shortage cost terms, than one with no modelling of inflow correlation for New Zealand power systems. (Last year we reported a 4.3% improvement. The better performance is due to the efforts made to improve the correlated model - see Section 12.4 in ). It has also been shown that, of all the models tested, the optimisation model which takes account of correlation explicitly is least susceptible to any errors due to mis-estimation of the true flow distribution from a limited historical sample. By comparison, heuristics are quite sensitive to mis-estimation of the flow distribution, tending to excessive shortage if the flow sample is on the high side, and especially if the observed standard deviation is also low (see Section 12.5 in ).
We note that ECNZ's modelling system is much more detailed than ours, includes heuristics to deal with correlation, and may be over-ridden to meet security requirements in practice. Thus the real savings available will be substantially less than those quoted. However these results suggest a worthwhile potential to be investigated. Grant and Miao are writing up several papers on this work for publication.
- M. Yang, Dual Dynamic Programming for Reservoir Management with Correlated Inflows. Ph.D. Thesis, Department of Management, University of Canterbury, 1995.
Tristram Scott has been studying the complexities of reservoir management in a deregulated electricity market. Particular emphasis has been placed on the moderating incentives that contracting provides to the generating companies.
The methodology employed is a simulation based on rules optimised via Dual Dynamic Programming. The DDP model uses a Cournot model of short term market behaviour as a sub-model. The Cournot model has recently been extended so that it now allows for either linear or constant elasticity approximations for the consumer demand curve. The theory behind these extensions is documented in Tristram's thesis  which should be completed by the end of 1995.
Some preliminary results were presented at conferences recently, at the CEPSI Conference in Christchurch in September 1994 , and at the IFORS Conference on Energy Models for Policy and Planning, in London, July 1995 (,). The paper presented at the IFORS Conference has been submitted to a special issue of ITOR, and several other papers are planned.
- T. J. Scott, Hydro Reservoir Management for an Electricity Market with Long-term Contracts. Ph.D. Thesis, Department of Management, University of Canterbury (in preparation).
- T. J. Scott and E. G. Read, Hydro Generator Gaming in a Deregulated Electricity Market. In Proceedings of 10th CEPSI Conference, p. 377-387, September 1994.
- T. J. Scott and E. G. Read, Modelling Hydro Reservoir Operation in a Deregulated Electricity Market. Presented to Energy Models for Policy and Planning, IFORS Conference, July 1995. (Also EMRG Working Paper EMRG-WP-95-05, Department of Management, University of Canterbury, 1995, and submitted to International Transactions in Operations Research).
- B. J. Ring, E. G. Read, and T. J. Scott, Modelling for a Deregulated Electricity Sector. Presented to Energy Models for Policy and Planning, IFORS Conference, July 1995.
Brendan Ring and Grant Read spent a significant part of the last year preparing a series of comprehensive reports on nodal electricity transmission pricing for Trans Power (NZ) Ltd (,,,). This work describes a new philosophical view of electricity spot pricing called "Dispatch Based Pricing." These reports have been very positively received by international reviewers.
Recently, Brendan presented papers at TIMS XXXIII in Singapore  and at the IFORS "Energy Models for Policy and Planning" Conference in London . He also visited Bill Hogan at Harvard University. A number of academic papers on nodal pricing have appeared, or should be appearing shortly in the literature (,). Brendan's thesis,  was submitted in December.
In the immediate future Brendan will prepare a number of papers and reports based both on his thesis and related topics (,,).
- E. G. Read and B. J. Ring, Dispatch Based Pricing: Philosophy and Methodology. In A. J. Turner (editor), Dispatch Based Pricing, Trans Power New Zealand Limited, Wellington, 1995.
- E. G. Read and B. J. Ring, Dispatch Based Pricing: Theory and Application. In A. J. Turner (editor), Dispatch Based Pricing, Trans Power New Zealand Limited, Wellington, 1995.
- E. G. Read, B. J. Ring, and M. C. Rosevear, Dispatch Based Pricing: Technical Reference. In A. J. Turner (editor), Dispatch Based Pricing, Trans Power New Zealand Limited, Wellington, 1995.
- E. G. Read, B. J. Ring, and M. C. Rosevear, Dispatch Based Pricing: Behaviour of Nodal Power Prices. In A. J. Turner (editor), Dispatch Based Pricing, Trans Power New Zealand Limited, Wellington, 1995.
- B. J. Ring and E. G. Read, "Best Compromise" Nodal Electricity Spot Pricing. Presented at TIMS XXXIII, Singapore, June 1995.
- W. W. Hogan, E. G. Read, and B. J. Ring, Using Mathematical Programming for Electricity Spot Pricing. Submitted to International Transactions in Operational Research, 1995. (Also EMRG Working Paper EMRG-WP-95-03, Department of Management, University of Canterbury, 1995).
- E. G. Read and B. J. Ring, A Dispatch Based Pricing Model for the New Zealand Electricity Market. In R. Siddiqi and M. Einhorn (editors), Issues in Transmission Pricing and Technology: A Collection of Readings, Kluwer Academic Press, 1995, p. 183-206. (Also EMRG Working Paper EMRG-WP-95-02, Department of Management, University of Canterbury, 1995).
- B. J. Ring and E. G. Read, Short Run Pricing in Competitive Electricity Markets. Canadian Journal of Economics, 1996 (to appear). (Also EMRG Working Paper EMRG-WP-95-01, Department of Management, University of Canterbury, 1995).
- B. J. Ring, Short Term Pricing in Decentralised Power Systems. Ph.D. Thesis, Department of Management, University of Canterbury, 1995.
- B. J. Ring and E. G. Read, Spot Pricing for Power System Security Constraints. EMRG Discussion Draft, Department of Management, University of Canterbury (in preparation).
- B. J. Ring and E. G. Read, Applying Spot Pricing Theory to Power Systems. EMRG Discussion Draft, Department of Management, University of Canterbury (in preparation).
- B. J. Ring and E. G. Read, Dispatch Based Pricing. EMRG Discussion Draft, Department of Management, University of Canterbury (in preparation).
The GARSP FORTRAN model originally used the LINDO optimisation library but now runs in the OS/2 environment with CPLEX and is written in C. The original DOS file based input regime has been replaced by a dynamic link library design using the Lotus External Program API for 1-2-3. The advantage of this approach is that input data and results can be handled seamlessly in a convenient spreadsheet front-end. The CPLEX libraries have proven to be significantly faster, improving the usefulness of the model as a platform for Trans Power to evaluate generation scenarios. This new version of the model was used in a project to estimate the cost, in terms of annual fuel bill, of meeting spinning reserve requirements in the New Zealand system.
The accelerated pace of change in New Zealand toward a market driven co-ordination mechanism is opening new areas of research. Recently Grant, Glenn, and Andrew, along with Brett Graydon from CORE Management Systems Ltd have been attempting to answer a series of important research questions regarding the shape of the forthcoming market. In response to the need for a tool to help answer these questions, Glenn has built a multi-period version of GARSP, with extensions to simulate a market based dispatch as well as a centralised dispatch. Issues relating to this research are discussed in several contract reports, working papers (,,), and in Glenn's thesis .
- G. R. Drayton-Bright, Modelling Hydro End-effects. EMRG Working Paper, Department of Management, University of Canterbury (in preparation).
- G. R. Drayton-Bright, Non-monotonicities in Hydro Group Response Profiles. EMRG Working Paper, Department of Management, University of Canterbury (in preparation).
- G. R. Drayton-Bright, Rolling Horizon Market Clearing Mechanisms. EMRG Working Paper, Department of Management, University of Canterbury (in preparation).
- G. R. Drayton-Bright, Hydro-thermal Coordination in a Competitive Electricity Market. Ph.D. Thesis, Department of Management, University of Canterbury (in preparation).
This year, our research work has continued the development of an integer programming model which John George presented at the INFORMS Conference in Los Angeles  and, in revised form, is being presented by Rick Rosenthal in IFORS Conference in Vancouver in June 1996. We also collaborated with Andy Philpott in a project which compared a variation of this integer programming model with a heuristic he and his team at Auckland University had developed. Both models were applied to the Waitaki river chain system and the results compared. As expected, the Integer Programming approach found better solutions, but often took excessive amounts of time to do so.
From this project it was recognised that the current methods were not able to make use of a number of managerial and commonsense insights, and that heuristic methods, whether it be at the strategic or tactical level, would probably warrant further investigation. We have discussed the Structured Analytical Method (developed by EMRG for thermal scheduling) for scheduling a station with multiple units , and plan to generalise it to optimise schedules for multiple stations in a river chain. Also promising are other recognised heuristic methods, such as Tabu Search and Simulated Annealing, which Andrew Kerr intends to investigate for his Ph.D.  in the context of incorporating uncertainty and managerial issues into short-term river chain optimisation.
- J. A. George, E. G. Read, R. E. Rosenthal, and A. L. Kerr, Optimal Scheduling of Hydro Stations: An Integer Programming Model. EMRG Working Paper EMRG WP-95-07, Department of Management, University of Canterbury, 1995.
- A. L. Kerr, Optimal Scheduling of a Power Station: A Structured Analytical Method. EMRG Discussion Draft, Department of Management, University of Canterbury, 1995.
- A. L. Kerr, Unit Scheduling in Hydro/Thermal Systems. Ph.D. Proposal, Department of Management, University of Canterbury, 1995.
Due to the focus on hydro issues, this area has received less attention from EMRG this year. One area of research has been the development of SAM, a Structured Analytical Method , which has been implemented from a Dynamic Programming perspective, but could equally be implemented from an Integer Programming perspective. This work will be developed further in Andrew Kerr's Ph.D.
- E. G. Read and A. L. Kerr, Optimal Scheduling of Thermal Stations: A Structured Analytical Method. EMRG Working Paper EMRG-WP-94-04, Department of Management, University of Canterbury, 1994.
There are a number of components in the electricity supply and distribution infrastructure that can be modelled as network flow optimisation problems. For instance, the movement of water in a river chain system or the dissemination of electrical power in a distribution grid, fit naturally into a network flow framework. Most problems, however, are complicated by additional restrictions to the problem beyond the standard flow balance constraints, and/or economies or diseconomies of scale in the objective function. Many problems contain both types of complications which make the determination of the optimal solution to such problems challenging. One promising approach for this class of problems is with non-convex network optimisation techniques. These methods provide a realistic representation of the problem while, at the same time, keeping the problem computationally tractable.
Two avenues of research in non-convex network optimisation are being undertaken at EMRG. The first avenue of research focuses on improved solution methods. Bruce Lamar has extended his "capacity improvement" for non-convex optimisation problems . Gavin Bell, in his Ph.D. work, has been studying theoretical and algorithmic approaches for solving general non-convex network optimisation problems . He has developed tighter conditional penalties for this class of problems (,,). Computational tests for these methods have been conducted by Chris Wallace and are described in (,).
The second area of research for non-convex network optimisation problems is in the development of an algebraic modelling language for this class of problems called NETSPEAK. NETSPEAK is designed to facilitate the specification and analysis of a general class of non-convex network optimisation problems. It can also be used to make computational comparisons of alternative solution algorithms. A summary of NETSPEAK is contained in . Bruce is presenting this work at several international conferences including (,). This work is now supported by a University Research Grant.
- G. J. Bell, Non-convex Network Models and Applications to Energy Modelling. Ph.D. Proposal, Department of Management, University of Canterbury, 1994.
- G. J. Bell and B. W. Lamar, A New Penalty for Concave Minimisation Over a Polytope. In Proceedings of 31st Annual ORSNZ Conference, August 1995, p. 127-134.
- G. J. Bell and B. W. Lamar, Enhanced Capacity Improvement for Concave Optimisation over a Polytope. EMRG Working Paper, Department of Management, University of Canterbury, 1995.
- G. J. Bell and B. W. Lamar, A Tighter Penalty Method for Concave Optimisation Over a Polytope. EMRG Working Paper, Department of Management, University of Canterbury (in preparation).
- G. J. Bell, B. W. Lamar, and C. A. Wallace, Capacity Improvement, Penalties, and the Fixed Charge Transportation Problem. EMRG Working Paper, Department of Management, University of Canterbury (in preparation).
- B. W. Lamar, Non-convex Network Optimization: Algorithms and Software. presented at the 15th International Mathematical Programming Symposium, Ann Arbor MI., August 1994.
- B. W. Lamar, Nonconvex Optimization over a Polytope using Generalized Capacity Improvement. Submitted to Journal of Global Optimization.
- B. W. Lamar, NETSPEAK: A math Programming Language for Nonconvex Network Optimization Problems. INFORMS Conference, New Orleans, October 1995.
- B. W. Lamar and C. A. Wallace, Revised-modified Penalties for Fixed Charge Transportation Problems. Submitted for publication.
- B. W. Lamar and C. A. Wallace, NETSPEAK: A Mathematical Programming Language for Nonconvex Network Optimisation Problems. In Proceedings of 31st Annual ORSNZ Conference, August 1995, p. 141-148.
Olly McCahon is working towards a Ph.D. on scenario development and strategic decision making under uncertainty . This work applies a multi-objective optimisation approach to the problem of strategic decision making under uncertainty. The aim is to relax four major assumptions that must be made if a problem is to be solved using stochastic optimisation:
- The scenarios can be assigned probabilities, which becomes difficult to support in the strategic planning arena with its long time frames, and the need to consider events which have no historical precedents.
- The decision maker(s) are risk neutral, which is not always appropriate.
- All significant aspects of the problem have been quantified and included in the model, otherwise the optimal solution to the model may not be optimal to the real problem.
- All objectives are in the same units in order to build a composite objective function which is untenable if the decision makers' objectives are different under different scenarios.
Multi-objective optimisation techniques can be used to find a set of trade-off efficient decisions for the decision maker to choose from. The decisions are "trade-off efficient" if it is not possible to find a different decision which is better for one scenario and no worse for any of the others. The decision maker can apply risk preferences to this choice, and consider the relative attractiveness of the associated recourse decisions. Qualitative criteria which could not be included in the model can be considered when choosing between the efficient decisions.
The theory has been developed for two stage problems with two and three scenarios. Work is in progress to extend the theory to multi-stage problems, and to the problem of comparing costs and benefits over time (rather than discounting to net present values, costs and benefits which occur at different times can be modelled as separate objectives, which are traded off by the decision maker). This approach supports costs and benefits which are in different units, a common occurrence with long-term decision making. For example, a nuclear power plant will produce electricity at a projected dollar cost, it will reduce carbon dioxide emissions compared to the coal fired station it replaces, and it will produce a residue of radioactive waste products which will have to be disposed of, or stored, for thousands of years. Initial work is presented in  and .
- O. C. McCahon, Scenario Generation for use in Strategic Optimization. Ph.D. Thesis, Department of Management, University of Canterbury (in preparation).
- O. C. McCahon, Efficient Set Scenario Analysis. In Proceedings of 31st Annual ORSNZ Conference, August 1995, p. 209-216.
- O. C. McCahon and J. A. George, Scenario Analysis using a Noninferior Solution Set. EMRG Working Paper EMRG-WP-95-09, Department of Management, University of Canterbury, 1995.
- E. Grant Read
Grant is the EMRG research team leader. He is a Senior Lecturer in Management Science in the Department of Management and a private consultant. He is an expert in many areas of energy modelling in the electricity sector. Grant has provided supervision and expertise in almost every EMRG project.
- John A. George
John is a Senior Lecturer in Management Science and Head of the Department of Management. His speciality areas are Mathematical Programming models and Heuristic methods. His involvement has been in Integer Programming modelling, DDP, and he is responsible for the administration of EMRG.
- Bruce W. Lamar
Bruce is a Senior Lecturer in Management Science in the Department of Management. He specialises in Network Optimisation and Mathematical Programming. During this year Bruce has been involved in many of the projects and, in particular, the development of new methods for solving non-convex networks. Bruce is developing a new network programming language called NETSPEAK.
- Gavin J. Bell
Gavin's Ph.D. involves theoretical and algorithmic approaches for non-convex network optimisation. These methods will then be applied to the short-term hydro scheduling problem.
- Glenn R. Drayton
Glenn's work studies the coordination of hydro and thermal stations in the developing de-centralised electricity market. He has been involved in several areas of work in electrical dispatch optimisation. His thesis is due for completion in 1996.
- Andrew L. Kerr
Andrew is a research associate. He also enrolled for a Ph.D. during the year. Andrew is working on unit scheduling models developing on the IP and DP approaches already modelled.
- Olly C. McCahon
Olly's area of interest is the application of scenario modelling and optimisation techniques to problems of long term planning under uncertainty.
- Yang Miao
Miao has now completed her Ph.D. Her research uses a Dual Dynamic Programming approach to produce better reservoir release rules.
- Brendan J. Ring
Brendan has completed his Ph.D. thesis on Nodal Pricing this year.
- Tristram J. Scott
Tristram plans to complete his thesis in 1996. He has continued his work on models for market simulation.
- Brett Graydon
Brett is an honours graduate in Management Science. He is a consultant employed by CORE working closely with EMRG on contract research projects
- Chris A. Wallace
Chris is an honours graduate in Management Science. He has continued to work on the non-convex network optimisation projects, in particular, the development of the algebraic modelling language called NETSPEAK.