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Peak load pricing model of an electric utility using pumped storage
Author(s) -
Jackson Raymond
Publication year - 1973
Publication title -
water resources research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.863
H-Index - 217
eISSN - 1944-7973
pISSN - 0043-1397
DOI - 10.1029/wr009i003p00556
Subject(s) - electricity , hydroelectricity , peak demand , peaking power plant , maximization , pumped storage hydroelectricity , environmental science , electricity pricing , nameplate capacity , peak load , water storage , electricity generation , power (physics) , computer science , automotive engineering , economics , electricity market , microeconomics , electrical engineering , engineering , mechanical engineering , physics , quantum mechanics , inlet
Electric utilities are increasing their use of water power at a rapid pace to supplement system capacity during peak demand intervals. During off‐peak periods electricity derived from fuel generators is used to store water, and when the peak period arrives, the demand is satisfied by production from both fuel and hydroelectric generators. This pumped storage technique is particularly well suited to nuclear plants that cannot be ‘turned off’ during low demand intervals. By using electricity for pumped storage, the nuclear generators can operate continuously at their most efficient output levels. This paper presents a peak load pricing model, based on partial equilibrium welfare criteria, for determining the optimal prices in the peak and off‐peak periods and the amount of electric power that should be used during the off‐peak intervals to pump water. Current peak load models have always assumed that the consumption and the production of electricity are instantaneous and have not considered the storage possibility by using water resources. A pricing rule for welfare maximization emphasizing capacity charges is first derived, and then a graphical model is developed that can be adapted to the installation of a particular utility. A method of evaluating plant expansion programs by using the model is also indicated, the benefits from increased consumption and lower operating costs being compared to the additional capacity cost. The suggested procedure can handle expansion programs of a complex nature including those faced with indivisibility constraints.