35 Pages Posted: 29 Jun 2011
Date Written: June 27, 2011
We present a robust optimization model for production planning under electricity supply that is subject to uncertain interruptions caused by participation in interruptible load contracts (ILCs). The objective is to minimize the cost of electricity used for production while providing a robust production plan which ensures demand satisfaction under all possible interruption scenarios. Due to the combinatorial size of the interruption scenario set, this is a challenging problem. Furthermore, we assume that no probabilistic information is known about the supply uncertainty and we only use the information given in the ILC to structure an uncertainty set that captures the possible scenarios. We first construct a general robust framework to handle this uncertainty and provide a heuristic algorithm which approximates the optimal solution of the robust model. Computational experiments are also conducted to compare the performance of the robust model and the heuristic algorithm. Next we show how to include operational impacts of interruptions such as “recovery modes” in the definition of the uncertainty set.
Keywords: production planning, robust optimization, interruptible load contract
JEL Classification: C44, C61
Suggested Citation: Suggested Citation
Latifoglu, Cagri and Snyder, Lawrence V. and Belotti, Pietro, Models for Production Planning under Power Interruptions (June 27, 2011). Available at SSRN: https://ssrn.com/abstract=1873728 or http://dx.doi.org/10.2139/ssrn.1873728