Power Dispatching at Old Dominion

The demand for electricity varies greatly during the day. Because large amounts of electricity

cannot be stored economically, electric power companies cannot manufacture

electricity and hold it in inventory until it is needed. Instead, power companies must

balance the production of power with the demand for power in real time. One of the

greatest uncertainties in forecasting the demand for electricity is the weather. Most

power companies employ meteorologists who constantly monitor weather patterns and

update computer models that predict the demand for power over a rolling, seven-day

planning horizon. This forecasted seven-day window of demand is referred to as the

company's load profile. Typically it is updated every hour.

Every power company has a baseload demand that is relatively constant. To satisfy

this baseload demand, a power company uses its most economical, low-cost power generating

assets and keeps them running continuously. To meet additional demands for

power above the baseload, a power company must dispatch (or turn on) other generators.

These other generators are sometimes called "peakers," as they help the power

company meet the highest demands or peak loads. It costs differing amounts of money

to bring different types of peakers online. And because different peakers use different

types of fuel (e.g., coal, gas, biomass), their operating costs per megawatt (MW) generated

also differ. Thus, dispatchers for a power company continually have to decide

which generator to bring online or turn off to meet their load profile with the least cost.

The Old Dominion Power (ODP) Company provides electrical power throughout

Virginia and the Carolinas. Suppose ODP's peak-load profile (that is the estimated load

above baseload) in MWs is currently estimated as follows:

Day 2 3 4 5 6 7 Load (in MWs) 4,300 3,700 3,900 4,000 4,700 4,800 3,600 ODP currently has three peaking generators offline that are available to help meet this load. The generators have the following operating characteristics: Generator Maximum MW Location Startup Cost Cost per Day Capacity per Day New River $ 800 $200 + $5 per MW 2,100 Galax $1,000 $300 + $4 per MW 1,900 James River $ 700 $250 + $7 per MW 3,000