Impact of Equipment Failures and Wind Correlation on Generation Expansion Planning

Generation expansion planning has become a complex problem within a deregulated electricity market environment due to all the uncertainties affecting the profitability of a given investment. Current expansion models usually overlook some of these uncertainties in order to reduce the computational burden. In this paper, we raise a flag on the importance of both equipment failures (units and lines) and wind power correlation on generation expansion decisions. For this purpose, we use a bilevel stochastic optimization problem, which models the sequential and noncooperative game between the generating company (GENCO) and the system operator. The upper-level problem maximizes the GENCO's expected profit, while the lower-level problem simulates an hourly market-clearing procedure, through which LMPs are determined. The uncertainty pertaining to failures and wind power correlation are characterized by a scenario set, and their impact on generation expansion decisions are quantified and discussed for a 24-bus power system

Economics of soil and water conservation

The Ethiopian highlands, inhabited by the vast majority of the Ethiopian human and livestock populations, are under continuous threat from soil erosion. Land degradation induced by soil erosion is considered to be among the major factors responsible for the recurrent malnutrition and famine problems in Ethiopia. Conservation efforts during recent decades have succeeded neither in triggering voluntary adoption of conservation practices nor in mitigating soil erosion problems. The purpose of this thesis is, therefore, to understand the socio-economic aspects underlying soil and water conservation decisions in the context of subsistence farmers in the Eastern Highlands of Ethiopia. In articles I, III, and IV, the farmers’ decision problem is modeled as a utility maximization problem, and econometric models are used to link the statistical model of observed data and the economic model. Stochastic dominance criteria are used, in article I, to determine whether adoption of a conservation practice results in higher expected grain yield and income and/or reduced variability. Limited dependent variable econometric models are used in articles III and IV in order to determine factors that influence farmers’ decisions on soil and water conservation, and their preference for types of development intervention. In article II, the decision problem is modeled as an intertemporal net benefit maximization problem, and a dynamic programming optimization model is applied to determine the optimal path of investment in soil and water conservation. Findings in article I suggest that conservation results in higher expected grain yield and income, but does not support the hypothesis that conservation unambiguously results in less variability than no-conservation. In article II, it is shown that the optimal path of investment in soil and water conservation depends on the discount rate and grain prices. The results also suggest that erosive agricultural practices yield higher return in the short-term, whereas conservation yields a higher and sustainable return in the long-term. The need to design incentive mechanisms that encourage farmers to have a longer planning horizon are among important suggestions proposed in articles I and II. Results, in article III, suggest that specific physical conditions of plots and socioeconomic characteristics of farm households influence the soil and water conservation decision behavior of farmers. Article IV suggests that the perceived priority of farmers with regard to agricultural problems and socio-economic characteristics, determines their preference for the type of development intervention. The results also suggest that there exists a complementarity between different interventions and hence a need to address them simultaneously to ensure a higher return from interventions. An important lesson to be drawn from articles III and IV is that differences in farming conditions and complementarities between policy programs need to be noted in any intervention program