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Multi-horizon stochastic programming

Abstract

Infrastructure-planning models are challenging because of their combination of different time scales: while planning and building the infrastructure involves strategic decisions with time horizons of many years, one needs an operational time scale to get a proper picture of the infrastructure’s performance and profitability. In addition, both the strategic and operational levels are typically subject to significant uncertainty, which has to be taken into account. This combination of uncertainties on two different time scales creates problems for the traditional multistage stochastic-programming formulation of the problem due to the exponential growth in model size. In this paper, we present an alternative formulation of the problem that combines the two time scales, using what we call a multi-horizon approach, and illustrate it on a stylized optimization model. We show that the new approach drastically reduces the model size compared to the traditional formulation and present two real-life applications from energy planning.

Category

Academic article

Client

  • Research Council of Norway (RCN) / 209697

Language

English

Author(s)

Affiliation

  • SINTEF Industry / Sustainable Energy Technology
  • Norwegian University of Science and Technology

Date

22.08.2013

Year

2014

Published in

Computational Management Science

ISSN

1619-697X

Publisher

Springer

Volume

11

Issue

1-2

Page(s)

179 - 193

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