Energy Costs
Dr. Lizhi Wang is using mathematical models and optimization techniques to solve engineering sustainability problems. What are the cost components associated with electricity prices? Modeling and analysis of electricity prices can provide managerial insights for system operators to improve the efficiency of the electricity market as well as help us understand the effects of other factors. For example, what are the potential economic impacts of plug-in hybrid electric vehicles (PHEVs) and related technologies?
In a recent study, Dr. Wang used a system model to decompose wholesale electricity prices (locational marginal prices). 
As seen in the pie chart, only 63% of the average price is due to power generation costs. The balance includes 3% for demand uncertainty, 6% paid to reserve a certain amount of capacity to ensure reliability, 23% for extra profit to the oligopoly power suppliers, and the interactions of these factors plus the limited transmission capacity accounts for the remaining 5%.
Department of Industrial and Manufacturing Systems Engineering, Black Engineering, Ames, Iowa 50011
Copyright © 2006, Iowa State University of Science and Technology. All rights reserved.
Non-Discrimination Statement and Information Disclosures