Production Cost Model Research Articles

The impact of wind power on electricity prices

This paper investigates the impact of wind power on electricity prices using a production cost model of the Independent System Operator – New England power system. Different scenarios in terms of wind penetration, wind forecasts, and wind curtailment are modeled in order to analyze the impact of wind power on electricity prices for different wind penetration levels and for different levels of wind power visibility and controllability. The analysis concludes that electricity price volatility increases even as electricity prices decrease with increasing wind penetration levels. The impact of wind power on price volatility is larger in the shorter term (5-min compared to hour-to-hour). The results presented show that over-forecasting wind power increases electricity prices while under-forecasting wind power reduces them. The modeling results also show that controlling wind power by allowing curtailment increases electricity prices, and for higher wind penetrations it also reduces their volatility.

Investigating Impacts of Alternative Crop Market Scenarios on Land Use Change with an Agent-Based Model

We developed an agent-based model (ABM) to simulate farmers’ decisions on crop type and fertilizer application in response to commodity and biofuel crop prices. Farm profit maximization constrained by farmers’ profit expectations for land committed to biofuel crop production was used as the decision rule. Empirical parameters characterizing farmers’ profit expectations were derived from an agricultural landowners and operators survey and integrated in the ABM. The integration of crop production cost models and the survey information in the ABM is critical to producing simulations that can provide realistic insights into agricultural land use planning and policy making. Model simulations were run with historical market prices and alternative market scenarios for corn price, soybean to corn price ratio, switchgrass price, and switchgrass to corn stover ratio. The results of the comparison between simulated cropland percentage and crop rotations with satellite-based land cover data suggest that farmers may be underestimating the effects that continuous corn production has on yields. The simulation results for alternative market scenarios based on a survey of agricultural land owners and operators in the Clear Creek Watershed in eastern Iowa show that farmers see cellulosic biofuel feedstock production in the form of perennial grasses or corn stover as a more risky enterprise than their current crop production systems, likely because of market and production risks and lock in effects. As a result farmers do not follow a simple farm-profit maximization rule.

The Economic Viability of Renewable Portfolio Standard Support for Offshore Wind Farm Projects in Korea

Offshore wind farm (WF) projects have been promoted by support schemes as part of the expansion of renewable energy resources in Korea. This paper examines in detail how the Renewable Portfolio Standard (RPS), which was adopted post the Feed-in-Tariff scheme in 2012, has had a profound impact on the economic benefits of offshore WFs in Korea. A framework for analyzing the economic viability of RPS is presented and applied to the sixth basic plan for long-term electricity supply and demand in Korea. The electricity market price is forecast using a reformulated probabilistic production cost (PPC) model, and the renewable energy certificate (REC) price is calculated using its determination rule. The results show that the existing RPS will be ineffective in increasing the penetration of offshore WFs in Korea; however, they also indicate that the economic viability of offshore WFs could be improved by adjusting the existing RPS.

The cost of additive manufacturing: machine productivity, economies of scale and technology-push

As part of the cosmos of digital fabrication technology, Additive Manufacturing (AM) systems are able to manufacture three-dimensional components and products directly from raw material and 3D design data. The layer-by-layer operating process of these systems does not require the use of tools, moulds or dies.Technology observers speculate that AM will have a profound economic impact on the manufacturing sector and indeed on wider society. By constructing a model of production cost for two different AM systems used commercially for the manufacture of end-use metal parts, Electron Beam Melting (EBM) and Direct Metal Laser Sintering (DMLS), this paper performs an inter-process comparison of cost performance. High specific costs, measured at £2.39 and £6.18 per cm3 of material deposited respectively, are identified as a central impediment to more widespread technology adoption of such additive systems.The research demonstrates differing levels of system productivity, suggesting that the observed deposition rates are not sufficient for the adoption of EBM and DMLS in high volume manufacturing applications. Despite the absence of amortisable tooling costs, the analysis also reveals that economies of scale are achievable in AM. The results reached are further discussed in the light of the varying strategic requirements posed by the market-pull and technology-push modes of innovation which are both found in the AM industry.

English

Climate change impacts caused South Africa to breed unique hop cultivars which are adapted to shorter and warmer winters and shorter day length in summer. However, climate change impacts in South African include further increases in temperature along with noticeable inter-seasonal variation in rainfall patterns. These changes have demanded a re-evaluation of the ability of South African hop farmers to adapt to climate change impacts. In order to assess the adaptive capacity of hop farming operations from a financial perspective, the study assessed the potential inflationary impacts of climate induced water related risk on the production cost of South African commercial hop operations. It was found that the South African hop price model is a cost-based model with fixed returns, which aims to maintain the gross margin above specified cost for hop farmers. This rather unique setup implies that returns on investment are fixed and that inflationary pressure cannot erode the profitability of hop farming operations. Climate induced inflationary impacts will therefore inflate the consumer price of hops since it is almost certain that breweries will pass on any inflationary impacts to the final consumer. We have distinguished between a temperature effect and a rainfall effect of climate change. Given an average dry yield of 1 739 kg of hops per hectare for the study area and a current market price of R51.39/kg for dry hops, the temperature effect will inflate the market price for hops with R1.03/kg, while the rainfall effect will inflate prices with R0.31/kg. The study found that a total increase of R1.34/kg (that is, a 3% increase) in the producer price of hops is therefore required to offset climate induced water-related risk on hop cultivation in the study area.   Key words: Climate change, hop farming, production cost model, South Africa.

Development and Production Costs Estimating for Aviation Equipment Based on Uncertainty Design

The estimation accuracy of aviation equipment development and production cost has very important significance on program budget management. At the beginning of aviation equipment development, the requirement has many unknown factors and the equipment design has uncertainty problem. That lead to the uncertainty of equipment's cost. Many researches usually assume the uncertainty in equipment design to certainty, ignoring the uncertainty of the system itself essentially. Theoretically, the efficiency of aviation equipment is an important factor which affects cost. To improve equipment's efficiency, the development needs more advanced processing equipment, more advanced materials and more system test and so on, which will cause higher cost. Therefore, in view of uncertainty, this study takes equipment effectiveness index as a new variable and an impact factor to research its reflection on development and the production cost. At the beginning, this paper shows the engineering practice of aviation equipment design uncertainty. Considering the reflection of equipment's effectiveness on development and production cost, cost estimation model based on effectiveness has been established. Using mathematical theories such as Monte Carlo Simulation and interval number, an evaluation model of development and production cost for aviation equipment is established under the condition of uncertainty design.

Modeling and optimization of turning duplex stainless steels

The attractive combination of high mechanical strength, good corrosion resistance and relatively low cost has contributed to making duplex stainless steels (DSSs) one of the fastest growing groups of stainless steels. As the importance of DSSs is increasing, practical information about their successful machining is expected to be crucial. To address this industrial need, standard EN 1.4462 and super EN 1.4410 DSSs are machined under constant cutting speed multi-pass facing operations. A systematic approach which employs different modeling and optimization tools under a three phase investigation scheme has been adopted. In phase I, the effect of design variables such as cutting parameters, cutting fluids and axial length of cuts are investigated using the D-Optimal method. The mathematical models for performance characteristics such as; percentage increase in radial cutting force (%Fr), effective cutting power (Pe), maximum tool flank wear (VBmax) and chip volume ratio (R) are developed using response surface methodology (RSM). The adequacy of derived models for each cutting scenario is checked using analysis of variance (ANOVA). Parametric meta-heuristic optimization using Cuckoo search (CS) algorithm is then performed to determine the optimum design variable set for each performance. In the phase II, comprehensive experiment-based production cost and production rate models are developed. To overcome the conflict between the desire of minimizing the production cost and maximizing the production rate, compromise solutions are suggested using Technique for Order Preference by Similarity to Ideal Solution (TOPSIS). The alternatives are ranked according to their relative closeness to the ideal solution. In the phase III, expert systems based on fuzzy rule modeling approach are adopted to derive measures of machining operational sustainability called operational sustainability index (OSI). Artificial neural network (ANN) based models are developed to study the effect of design variables on computed OSIs. Cuckoo search neural network systems (CSNNS) are finally utilized to constrainedly optimize the cutting process per each cutting scenario. The most appropriate cutting setup to ensure successful turning of standard EN 1.4462 and super EN 1.4410 for each scenario is selected in accordance with conditions which give the maximum OSI.

Analytical frameworks to incorporate demand response in long-term resource planning

Many utilities are obligated by state regulatory or legislative requirements to consider demand response (DR) as part of their resource planning process. There are several ways to incorporate DR into resource planning modeling and each has its advantages and disadvantages. We explore the current analytical frameworks for incorporating DR into long-term resource planning. We also consider whether current approaches accurately and realistically model DR resources in capacity expansion and production cost models and whether barriers exist to incorporating DR into resource planning models in a more robust fashion. We identify 10 specific recommendations for enhancing and expanding the current approaches.

Customer-economics of residential photovoltaic systems (Part 1): The impact of high renewable energy penetrations on electricity bill savings with net metering

Residential photovoltaic (PV) systems in the US are often compensated at the customer's underlying retail electricity rate through net metering. Given the uncertainty in future retail rates and the inherent links between rates and the customer–economics of behind-the-meter PV, there is growing interest in understanding how potential changes in rates may impact the value of bill savings from PV. In this article, we first use a production cost and capacity expansion model to project California hourly wholesale electricity market prices under two potential electricity market scenarios, including a reference and a 33% renewables scenario. Second, based on the wholesale electricity market prices generated by the model, we develop retail rates (i.e., flat, time-of-use, and real-time pricing) for each future scenario based on standard retail rate design principles. Finally, based on these retail rates, the bill savings from PV is estimated for 226 California residential customers under two types of net metering, for each scenario. We find that high renewable penetrations can drive substantial changes in residential retail rates and that these changes, together with variations in retail rate structures and PV compensation mechanisms, interact to place substantial uncertainty on the future value of bill savings from residential PV.

Comparative Eco-efficiency Analyses of Copper to Copper Bonding Technologies

This paper compares the eco-efficiency of Low Temperature Copper to Copper Bonding (LTCCB) technology against the Conventional Method (CM). The analyses look into the energy and material consumables consumption profiles of LTCCB technology and the Conventional Method (CM) which requires higher bonding temperature. The energy profile includes identifying the power signatures of the bonding process, illustrating the power consumption at different phases of bonding. Through production cost modeling and carbon footprint assessment, the critical cost drivers and carbon footprint hotspots are identified for both technologies. They are Absolute Ethanol consumption during Organic Coating process and energy consumption during bonding process. The comparative study developed an eco-efficiency graphical representation to position the eco-efficiency of both LTCCB technology and CM. LTCCB technology carbon footprint is 12.29% lower than CM. However, CM total unit cost is 47.42% lower than LTCCB technology. To improve the eco-efficiency of LTCCB technology, it is recommended to replace Absolute Ethanol with Deionized water (DI water) at the Organic Coating process. Scenario analysis shows that both total unit cost and carbon footprint of LTCCB technology are lower than that of CM. Using the eco-efficiency graphical representation, the recommendation has certainly improved the eco-efficiency of LTCCB technology.

Key issues of wind capacity integration in congested areas of the Taiwan power system

As wind power penetrations increase in isolated power systems, it is very important to understand how variations in wind plant outputs affect the operation of the multi-area isolated system on a day-to-day basis and what the associated costs are. Production cost models need to be further advanced to adequately simulate utility operations and unit commitment (UC) of generation in response to higher wind penetrations. In this study, the dynamic programming (DP) algorithm is extended to facilitate economic sharing of generation and reserve across areas and to coordinate wind and thermal generation scheduling in isolated power systems with large integration of wind capacity. Five heuristic strategies are incorporated in the DP algorithm to improve solution quality and performance. Four important issues of wind capacity integration in congested areas of the Taiwan power system are also investigated and discussed by using the developed UC software. Numerical experiments are included to understand wind generator capacity in production cost analysis and to illustrate the effect of transmission capacity limits on wind power penetration level in each area.

Asymmetric Cournot Duopoly: A Game Complete Analysis

In this paper, we apply the Complete Analysis of Differentiable Games (introduced by D. Carfì in Topics in Game Theory (2012), Carfì ICT 2009, Carfì AAPP 2009, Carfì GO 2009; already employed by himself and others in Carfì TPREF 2011, Carfì AAPP 2010, Carfì ISGC 2009) and some new algorithms, using the software wxMaxima 11.04.0, in order to reach a total scenario knowledge (that is the total knowledge of the payoff space of the interaction) of the classic Cournot Duopoly (1838), viewed as a complex interaction between two competitive subjects, in a particularly interesting asymmetric case. Moreover, in this work we propose a theoretical justification, for a general kind of asymmetric duopolistic interactions (which often appear in the real economic world), by considering and proposing a Cobb-Douglas perturbation of the classic linear model of production costs.

A stochastic framework for reactive power procurement market, based on nodal price model

A new modified nodal pricing method is presented in this paper to calculate reactive power price. This article tries to solve the problems of traditional nodal pricing methods to be able to consider opportunity and availability costs for the generators. A modified model of generators reactive power production cost has been used in OPF objective function considering normal and contingency conditions. Availability cost would be estimated considering the volume of network demand from the generators in contingency states through probability calculations. This cost would be paid to all the units that possibly will needed to produce reactive power in contingency states. Purvey of required availability of generation units to deal with emergency conditions, encouraging providers to invest in critical areas in the network and fair distribution of reactive power production costs over several producers are some advantages of the proposed method. The proposed method is tested on IEEE 24 bus RTS and is compared with the uniform pricing method.

The Impact of Leverage on Real Earnings Management

The primary aim of this study is to examine the association between leverage and Real Earnings Management (REM) activities. It analyses how leverage is able to reduce earnings management (EM). This study uses Abnormal Cash Flow from Operation, Abnormal Production Cost and Abnormal Discretionary Expenses model by Roychowdhury, 2006, as a proxy for REM. Using a sample of 3,745 firm-year observations for the period of 2006-2011, which listed on Bursa Malaysia, the study find that a significant negative association between leverage and REM. The finding reveals that leveraged firms have lower levels of REM. This supports the view that leverage limits the REM activities, which in turn, could affect the quality of accounting earnings.

Manufacturing Information Model for Design for Manufacturing

In the light of growing global competition, organizations around the world today are constantly under pressure to produce high-quality products at an economical price. The integration of design and manufacturing (DFM) activities into one common engineering effort has been recognized as a key strategy for survival and growth. In this paper, the importance of DFM and parts information model was introduced in today's manufacturing enterprise. It describes the classification of parts information model; namely: product models, process models and cost models, the main content and research status that the model contained. The author has proposed a semantic network description method of the manufacture parts information of and details its main content, which is the core of this paper.

Cost model development using virtual manufacturing and data mining: part I—methodology development

This paper reports on research, the aim of which has been to investigate the use of virtual manufacturing and data mining techniques to automate the identification of manufacturing process time estimating relationships that form the basis of product and process cost models. Such models provide information that is critical to all stages of the product development process and to ensuring that development of cost-effective product design and production methods. Use of virtual manufacturing models and data mining techniques enables the majority of the activities involved in the cost model development process to be automated. Hence, reducing the time and effort required, reducing the current high level of reliance on expert judgment and enabling higher levels of cost detail to be estimated. The research reported, therefore, focuses on the use of virtual manufacturing to generate datasets which are then analysed using data mining to identify suitable cost models for manufacturing processes. Part I, of this two-part paper, describes the development of a model development methodology that makes use of virtual manufacturing models and data mining techniques and uses case study data to validate this methodology. Part II will then examine in detail the effectiveness of alternative data mining algorithms in terms of their ability to develop relationships that are (1) representative of the real causal relationships that exist and (2) provide a high level of estimating accuracy.

Economic evaluation of high welfare indoor farrowing systems for pigs

AbstractNew livestock housing systems designed to improve animal welfare will only see large-scale commercial adoption if they improve profitability, or are at least cost neutral to the farm business. Economic evaluation of new system developments is therefore essential to determine their effect on cost of production and hence the extent of any market premium necessary to stimulate adoption. This paper describes such an evaluation in relation to high welfare farrowing systems for sows where any potential system needs to reconcile the behavioural needs of the sow with piglet survivability, acceptable capital and running costs, farm practicality and ease of management. In the Defra-sponsored PigSAFE project, a new farrowing system has been developed which comprises a loose, straw-bedded pen with embedded design features which promote piglet survival. Data on this and four other farrowing systems (new systems: 360° Farrower and a Danish pen; existing systems: crate and outdoor paddock) were used to populate a model of production cost taking account of both capital and running costs (feed, labour, bedding etc). Assuming equitable pig performance across all indoor farrowing systems, the model estimated a higher production cost for non-crate systems by 1.6, 1.7 and 3.5%, respectively, for 360° Farrower, Danish and PigSAFE systems on a per-sow basis. The outdoor production system had the lowest production cost. An online survey of pig producers confirmed that, whilst some producers would consider installing a non-crate system, the majority of producers remain cautious about considering alternatives to the farrowing crate. If pig performance in alternative indoor systems could be improved from the crate baseline (eg through reduced piglet mortality, improved weaning weight or sow re-breeding), then the differential cost of production could be reduced. Indeed, with further innovation by pig producers, management of alternative farrowing systems may evolve to a point where there can be improvements in both welfare and pig production. However, larger data sets of alternative systems on commercial farms will be needed to explore fully the welfare/production interface before such a relationship can be confirmed for those pig producers who will be replacing their units in the next ten years.

Minimum long-term cost solution for remote telecommunication stations on the basis of photovoltaic-based hybrid power systems

In the case of the telecommunication (T/C) services' expansion to rural and remote areas, the market generally responds with the minimum investments required. Considering the existing situation, cost-effective operation of the T/C infrastructure installed in these regions (i.e. remote T/C stations) becomes critical. However, since in most cases grid-connection is not feasible, the up-to-now electrification solution for remote T/C stations is based on the operation of costly, oil consuming and heavy polluting diesel engines. Instead, the use of photovoltaic (PV)-based hybrid power stations is currently examined, using as a case study a representative remote T/C station of the Greek territory. In this context, the present study is concentrated on the detailed cost-benefit analysis of the proposed solution. More precisely, the main part of the analysis is devoted to develop a complete electricity production cost model, accordingly applied for numerous oil consumption and service period scenarios. Note that in all cases examined, zero load rejections is a prerequisite while minimum long-term cost solutions designated are favorably compared with the diesel-only solution. Finally, a sensitivity analysis, demonstrating the impact of the main economic parameters on the energy production cost of optimum sized PV-diesel hybrid power stations, is also provided.

Up with wind

In this article, we focus on three important aspects of large regional wind-integration studies: wind data development, transmission analysis, and the modeling of wind-integration scenarios. Careful development and validation of the wind data inputs to an integration study are essential to obtain meaningful results. New transmission will be required for much of the future wind development; hence, it is imperative to plan for this transmission because it takes longer to build new transmission than it does to build wind plants. The transmission analysis can include a transmission-expansion plan to be done as part of the wind-integration study or can use existing transmission plans and analyze potential congestion. Finally, scenario modeling investigates the operational impacts of wind variability and uncertainty. The production cost models can be either deterministic or stochastic in nature. They can examine a wide range of sensitivities.including unit commitment and operating reserve considerations, different market scenarios, carbon reductions for different scenarios, storage considerations, forecasting, and the contribution of wind to system reliability.

Analysis of Manufacturing Productivities of Integrated Economic Regions in Korea using Spatial Spillover Effect Model of Production Costs

Analysis of Manufacturing Productivities of Integrated Economic Regions in Korea using Spatial Spillover Effect Model of Production Costs