Premium power investment strategy utilizing the economy of scale of custom power devices

Abstract

The possible existence of ‘economy of scale’ in manufacturing poor power quality (PQ) mitigation devices motivates customers to participate in a common mitigation solution. A custom power park (CPP) is an option where the CPP operator offers a set of custom solutions to a group of customers. Given that these custom solutions comprise one or many custom power devices, both CPP operators and the customers are expected to coordinate to obtain individual mitigation device ratings while maximizing the overall utility of customers. Here, CPP operators would calculate ratings of custom solutions and associated unit cost for the minimal total cost, while the customers are expected to select custom solutions to maximize their overall benefit. Furthermore, the customers utilize their willingness-to-pay function in this process and strictly participate in this arrangement if the utility received is more than their self-generated non-negative utility. Without the CPP operator, customers would form a CPP-like arrangement to recover the cost of investment and operation and maintenance. This combinatorial problem has been solved in two stages, involving the calculation of independently generated utility in the first stage and the overall CPP designing problem in the second stage. While customer and operator-side nonlinearities in the cost functions have been suitably discretized, the proposed methodology ensures that the solution space remains intact. The proposed method is illustrated using three devices, three custom solutions, and three customers. • Existence of economy of scale is a motivating factor for common mitigation solution. • A system-wide PQ improvement might not lead to a socially justifiable outcome. • Customers participate if utility received is more than self-generated utility. • Proposed method converts the MINLP problem into MIP. • Proposed methodology could be used for complex problems with similar structure.