An application of reflected diffusions to the problem of choosing between hydro and thermal power generation

An application of reflected diffusions to the problem of choosing between hydro and thermal power generation

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Article ID: iaor19931811
Country: Netherlands
Volume: 44
Issue: 1
Start Page Number: 117
End Page Number: 139
Publication Date: Jan 1993
Journal: Stochastic Processes and Their Applications
Authors:
Keywords: control processes, stochastic processes
Abstract:

It is shown that a certain type of stochastic control problems has a solution (optimal stochastic process) which can be realized as a diffusion with vertical reflection on the boundary of a planar set. The stochastic control problem is motivated by the specific question whether further expansion of the electricity supply system should be based on thermal power (where only fuel costs are taken into account) or on hydro power (where only the initial construction costs are considered), given a stochastic demand.

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