Applied Operations Research and Financial Modelling in Energy: Practical Applications and Implications PDF
Preview Applied Operations Research and Financial Modelling in Energy: Practical Applications and Implications
André B. Dorsman Kazim Baris Atici Aydin Ulucan Mehmet Baha Karan Editors Applied Operations Research and Financial Modelling in Energy Practical Applications and Implications Applied Operations Research and Financial Modelling in Energy · · André B. Dorsman Kazim Baris Atici · Aydin Ulucan Mehmet Baha Karan Editors Applied Operations Research and Financial Modelling in Energy Practical Applications and Implications Editors AndréB.Dorsman KazimBarisAtici VUUniversityAmsterdam HacettepeUniversity Amsterdam,TheNetherlands Ankara,Turkey AydinUlucan MehmetBahaKaran HacettepeUniversity HacettepeUniversity Ankara,Turkey Ankara,Turkey ISBN978-3-030-84980-1 ISBN978-3-030-84981-8 (eBook) https://doi.org/10.1007/978-3-030-84981-8 ©TheEditor(s)(ifapplicable)andTheAuthor(s),underexclusivelicensetoSpringerNature SwitzerlandAG2021 Thisworkissubjecttocopyright.AllrightsaresolelyandexclusivelylicensedbythePublisher,whether thewholeorpartofthematerialisconcerned,specificallytherightsoftranslation,reprinting,reuse ofillustrations,recitation,broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,and transmissionorinformationstorageandretrieval,electronicadaptation,computersoftware,orbysimilar ordissimilarmethodologynowknownorhereafterdeveloped. Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublication doesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant protectivelawsandregulationsandthereforefreeforgeneraluse. Thepublisher,theauthorsandtheeditorsaresafetoassumethattheadviceandinformationinthisbook arebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsor theeditorsgiveawarranty,expressedorimplied,withrespecttothematerialcontainedhereinorforany errorsoromissionsthatmayhavebeenmade.Thepublisherremainsneutralwithregardtojurisdictional claimsinpublishedmapsandinstitutionalaffiliations. ThisSpringerimprintispublishedbytheregisteredcompanySpringerNatureSwitzerlandAG Theregisteredcompanyaddressis:Gewerbestrasse11,6330Cham,Switzerland Foreword by Otto Jager ForEveryoneonThisPlanet President John F. Kennedy in 1961 proclaimed that the United States would place a man on the moon by the end of the decade. In 1969, Neil Armstrong took his ‘onesmallstep’onJuly20th—theAmericansmadeitwithfive-and-a-halfmonths tospare.Afteradevastatingfloodin1953thattook1836lives,theDutchdecided tomostlyclosetheNorthSeadeltaandbuildastormsurgebarrier.Twelvebuilding projectsand43yearslater,thecoastlineisreducedfrom700kmtoonly80km. The energy transition is often compared to the man on the moon-mission or to the Delta works—mostly to emphasize the vastness of the challenge we are now workingon.Exceptionalandimpressiveasthoseachievementsforeverwillbe,the energytransitionsurpassesthembyfar.Thechangetoarenewableenergysystemwill haveseriousimpactoneveryeconomicalsectorandonthelifeofeveryindividual in our society. Armstrong’s ‘small step for a man’ needs an upgrade: ‘The energy transitionwillbeanupswingforeveryoneonthisplanet’. It is exactly that aspect that makes this transition such an immense challenge: it depends on the cooperation of all people. More than ever before, decisions on remodellingtheenergysystemwillbeaffectedbysocial,technologicalandeconomic trends.Theworldofenergywillbemoredynamic,changeswillbemoredrasticand peoplewillbemoreinvolvedinrenewablesolutions.Extrachallenging,butalsoan opendoorfornewchances—illustratedbythesuccessandpotentialofgreenbonds infinancialmarkets. Ofcourse,theenergysectorisusedtolookingforwardforatleastadecadeand anticipate on substantial changes. In this process, we need all the information and analysesavailabletomaketherightdecisions.ThesestudiesonAppliedOperations ResearchandFinancialModellinginEnergycontributetoabetterunderstandingof policyimplicationsoftheproposedorappliedmethodologies.Theyalsoshowthe valueofusingtherightmodelsandmethodsfordecisionmaking.I’mconvincedthat v vi ForewordbyOttoJager theseperspectivesfromOperationsResearchandFinancewillhaveapositiveeffect onthequalityofourdecisions—strategic,tactical,andoperational. OttoJager ChiefFinancialOfficer TenneTTSOB.V. Arnhem,TheNetherlands Contents Introduction: Applied Operations Research and Financial ModelinginEnergy ............................................... 1 AndréB.Dorsman, KazimBarisAtici, AydinUlucan, andMehmetBahaKaran OptimizationMethodsonElectricityGenerationandTransmission ExpansionPlanningProblem ....................................... 7 MahdiNoorizadeganandAlirezaShokri Demand-DrivenElectricitySupplyOptionsofElectricVehicles: Modelling, Simulation, and Management Strategy of Public ChargingStations ................................................. 27 ElvinCobanandGokturkPoyrazoglu AReviewonSmartEnergyManagementSystemsinMicrogrids BasedonPowerGeneratingandEnvironmentalCosts ................ 51 Özgür˙IcanandTahaBug˘raÇelik MeasuringEfficiencyandProductivityChangeintheTurkish ElectricityDistributionSector ...................................... 69 YetkinCinarandTekinerKaya PriceandVolatilityForecastinginElectricitywithSupportVector RegressionandRandomForest ..................................... 101 MahmutKara,KazimBarisAtici,andAydinUlucan ForecastingtheHydroInflowandOptimizationofVirtualPower PlantPricing ...................................................... 125 SezerÇabuk,ÖzençMuratMert,A.SevtapSelcuk-Kestel,andErkanKalaycı ComparingtheRenewableEnergyTechnologiesviaForecasting Approaches ....................................................... 153 FazılGökgözandFahrettinFiliz BusinessCyclesandEnergyRealOptionsValuation .................. 173 TuralayKencandMehmetFatihEkinci vii viii Contents UnderstandingtheElectricitySwitchingBehaviorofIndustrial Consumers:AnEmpiricalStudyonanEmergingMarket ............. 201 MursideErdogan, SelinMetinCamgoz, MehmetBahaKaran, andM.HakanBerument Does the Market Value Clean Innovation? Evidence from US ListedFirms ...................................................... 225 AntoineDechezleprêtre,CalB.Muckley,andParvatiNeelakantan ThePowerGrid:FromaTechnicaltoaFinanceIssue.WhoBears theFinancialRisk? ................................................ 263 AndréB.DorsmanandKeesvanMontfort Introduction: Applied Operations Research and Financial Modeling in Energy AndréB.Dorsman,KazimBarisAtici,AydinUlucan, andMehmetBahaKaran 1 Introduction Decisionsintheenergysectoraregenerallycomplexwithmultipleconflictingobjec- tives.Accumulatingdemand,increasingcompetition,risingawarenessonenviron- mentalissues,togetherwithevolvingrulesandregulationsareallbindingtheenergy sectorwithenvironmental,social,andfinancialpressuretokeeptheproductionand distribution processes under control. The planning in the sector usually involves many sources of uncertainty and risk, varying time frames, and a large number of stakeholders with different views, which makes the application of Operations Research(OR)methodsparticularlysuitable.Thereexistsavastliteratureonenergy sectorapplicationsofORmethodologies.Thisisduetofactthatoptimizationand rationaldecision-makingarevitaltobuildingupmoresustainableenergymanage- mentsystemsinsuchadynamicandcompetitivebusinessenvironment.Inthisvein, financialdecisionsareoneofthemainlegstobehandledsinceenergyinvestments areusuallycapitalintensive. Financial Modelling (FM) is a scientific approach for decision making and its methods are capable of supporting financial decision making at different levels of varioussectorsaswellastheenergysector.Itispossibletoidentifyawidespectrum of application areas in energy finance that may include but not limited to pricing B A.B.Dorsman( ) VUUniversityAmsterdam,Amsterdam,Netherlands K.B.Atici·A.Ulucan·M.B.Karan DepartmentofBusinessAdministration&EnergyMarketsResearchandApplicationCenter, HacettepeUniversity,Ankara,Turkey e-mail:[email protected] A.Ulucan e-mail:[email protected] M.B.Karan e-mail:[email protected] ©TheAuthor(s),underexclusivelicensetoSpringerNatureSwitzerlandAG2021 1 A.B.Dorsmanetal.(eds.),AppliedOperationsResearchandFinancialModelling inEnergy,https://doi.org/10.1007/978-3-030-84981-8_1 2 A.B.Dorsmanetal. andhedgingdecisions,understandingthemarketdynamicsandmanagingdemand, measuringtheeffectivenessofregulations,assessingthefeasibilityandefficiencyof investments,supervisingcashflows,capitalbudgeting,allocatingresourcesandeval- uatingrisk.Thisisachievedbytheemploymentofanextensiverangeofquantitative tools such as deterministic and stochastic optimization, multiple criteria, multiple objective and fuzzy decision-making methods, simulation, econometric modeling, statisticalinference,andcontemporarilybyapplicationoflearningalgorithms. Applied Operations Research and Financial Modelling in Energy (AORFME) aimstocontributetothebothacademicandpractitionersidesoftheenergysectorby offeringseveralmodelingapplicationsfollowedbypolicyimplicationstoaidvarious decisions faced in the sector. The chapters of the book mainly aim to focus on a varietyofenergydecisions,topresentaquantitativeperspectiveonthesedecisions, and to provide policy implications of the proposed or applied methodologies. For thispurpose,webringagroupofORandFinanceresearcherstogetherandpresent acollectionofchaptersthatcontributetotheapplicationsinthefieldofEnergy. 2 OperationsResearchandFinancialModellinginEnergy ThevolumecomprisestwelvechaptersontheapplicationofOperationsResearchand FinancialModellingintheenergysectorgroupedintothreemainparts.Withinthe scopeofthebook,avastarrayofproblemsdevotedtoenergymarketsisaddressed such as electricity generation & transmission planning, location and price deci- sions, smart energy management systems, efficiency evaluation, price & volatility forecasting,powerplantpricing,thepotentialofrenewableinvestments,valuation issues,consumerdecisions,andfinancialriskanalysis.Thebookpresentsresearch on both macro and micro levels as well as research focus on market dynamics, renewableenergy,pricing,andcapacitydecisions. The above problem areas have been undertaken by the authors of the chapters with a variety of methods. Methods implemented involve a range of techniques of Operations Research and Financial Modelling from optimization to forecasting andfromconventionalstatisticalmethodstomachinelearningmethods.Examples include Mixed Integer Programming, Simulation-based Optimization, Data Envel- opment Analysis, Time Series Forecasting, Malmquist Productivity Indices, Arith- metic Brownian Motion, Principal Component Analysis, Logistic regression, Deep LearningMethods,SupportVectorRegression,andRandomForest. Regarding the areas of application/industries, the volume presents research devoted to different types of energy problems. The application areas also involve variety with respect to means of production and networks. The chapters include researchonintegratednaturalgas&powernetworks,hydroelectricitypowerplants, electricitydistributioncompanies,electricvehicles,wind-hydroenergytechnologies, andsmartenergymanagementsystemsinmicrogrids.Therealsoexistchapterson energyoptions,electricitymarkets,attitudesofindustrialconsumers,andvaluation ofcleaninnovation.
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