Decision Tree

Topics: Decision theory, Electricity generation, Decision tree Pages: 16 (3866 words) Published: October 14, 2009
Oglethorpe Power Corporation Decides about Investing in a Major Transmission System A D A M BORISON

Applied Decision Analysis. Inc. 27W Sand Hill Road Mcnio Park. California 94025

Oglethorpe Power Corporation (OPC) provides wholesale power to consumer-owned distribution cooperatives in Georgia. Late in 1990, OPC managers learned that Florida Power Corporation wanted to expand its connections to Georgia with another transmission line. To decide whether to build this line, OPC worked with Applied Decision Analysis, Inc. to conduct a comprehensive decision analysis in less than two weeks. The results of the analysis helped persuade OPC to shift from a joint venture strategy with Georgia Power to an independent strategy of direct negotiations with Florida Power. These negotiations would serve as a first step towards building the transmission line, and would keep other options open as information regarding the competitive situation was gathered.

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n recent years, the wholesale electric gia, has grown with large nuclear and coalpower market in the Southeastern fired plants coming on line. The result is United States has become very active. Flor- substantial power flows from Georgia and ida's population and power needs bave nearby states into Florida (Figure 1) [Regrown faster than the state's power genersource Data International 1990]. ation capacity. At the same time, tbe availOgletborpe Power Corporation (OPC) is ability of surplus power in southeastern a generation and transmission cooperative states other tban Florida, including Georthat provides wholesale power to 39 conCiipvri>;hi c IW^, Instilute fur OfVMliani Rt'-.-jrch jnd Ihf MdiiJBi'iifnt StiiTiits linMl ;in2/9S/2=iO2/On25S01 25 This pflpfr wiis rt'ft'reod Ill-CISION ANALYSIS—AI'PLICATIONS INDUSTRItS —HLEtTRlC

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in Georgia and Florida. Late in 1990, bowever, OPC management learned tbat Florida Power Corporation (FPC) wanted to expand its connections to Georgia with another 500 kilovolt (kV) line capable of transmitting over 1,000 MW. The key question facing OPC was whether to add tbis additional transmission capacity and if so in wbat form. Depending on bow OPC structured tbe investment and operated the line, the required investment could be on the order of $100 million or more and tbe annual savings could be on tbe order of $20 million or more. Tbe investment could be one of OPC's largest, and tbe savings could represent several percent of OPC's annual budget. As they began to study tbis issue, OPC managers recognized that it was botb important and difficult: important because of tbe level of investment required and potential savings involved; difficult because of the multiple options, tbe uncertain consequences, and tbe conflicting objectives inberent in tbe decision. Consequently, tbey chose to use formal decision analysis and to work witb Applied Decision Analysis (ADA) to address this problem. Study Approach Decision analysis bas become quite popular in tbe electric power industry in tbe United States, in part because the Electric Power Researcb Institute (EPRI) bas actively encouraged decision analysis training and application. Decision analysis bas been used in sucb areas as capacity planning, environmental compliance, fuel procurement, and plant operations [Farghal, El-Dewniey, and Abdel Aziz 1987; Mobasheri and Williams 1990; Norris, Sweet, and Borison 1991; Oatman and

Figure 1: Florida is a net power buyer, while Alabama, South Carolina, and Georgia are net power sellers. sumer-owned distribution cooperatives in Georgia. Peak demand in 1990 was 3,700 megawatts (MW), and energy production was 14,000,000 megawatt-bours (MWb). Tbis represents over 20 percent of tbe power in tbe state. The remainder of the market is dominated by Georgia Power Company (GPC), part of the Southern Company system. Botb OPC and GPC bave their own generation facilities, and they share some jointly-owned plants....

References: Call. II. J. .ind Miller, W. A. 1990, "A comparisun of approaches and implementations for automating decision analysis," Reliai 'ilili/ Engineering ami System Safety. Vol. 30. No. 1-3, pp. 115-162. Cohn, A. 1990, XATALYST: A group process for strategic decision making" in Decision Support Methods for the Electric Power hidustrxj. Electric Power Research Institute, Palo Alto, California (May). Farghal, S.; E!-Dewniey, R.; and Abdel Aziz, M. 1987, "Generation expansion planning using the decision tree technique," Electric Power Si/s/fH/s Research, Vol. 13, No. 1 (August), pp. 59-70. Cerber. M. 1990. "Decision analysis^the MIDAS way" in Decision Support Methoiis for the Electric Power Industry, Electric Power Research Institute, Palo Alto, California (May).
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Merkhofer, M. W. 1987. "Quantifying judgmental uncertainty: Methodology, experiences, and insights," /£££ Transactions on Systems, Man a)id Ci/bernctics, Vol. SMC-17, No. 5 (September-October), pp. 741-752. Mobasheri, F. and Williams, B. R. 1990, "Using decision analysis for evaluation of transmission projects" in Decision Support Methods for Ihe Electric Pozoer Industry, Electric Power Research Institute, Palo Alto, California (May). Norris, C ; Sweet, T.; and Borison, A. 1991, "Acid rain compliance planning using decision analysis" presented at PowerGen '91, Tampa, Florida, December. Oatman, E. and Lang, J. 1990, "PowerCuach: An intelligent decision system for bulk power marketing decisions" in Decision Support Methods for the Electric Power Industry, Electric Power Research Institute, Palo Alto, California (May). Resource Data International 1990, Bulk Power Markets in the United States, Resource Data International, Boulder, Colorado (December). Sheble, G. and Grigsby, L. 1986, "Decision analysis solution of the unit commitment problem," Electric Power Systems Research, Vol. 11, No. 2 (October), pp. 85-93. Stael von Holstein, C-A S. and Matheson, J, E. 1979, A Manual for Encoding Probability Distributions. SRI International, Menlo Park, California. Taylor, R. W. and Deb, R. K. 1490, "Evaluation of uncertainties in integrated planning using UPLAN," in Decision Support Methods for the Electric Power Industry, Electric Cower Research Institute, Palo Aito, California (May). James M. Agee, Manager, Transmission Planning, Oglethorpe Power Corporation, 21 East Exchange Place, PO Box 1349, Tucker, Georgia 30085-1349, writes, "Oglethorpe Power Corporation utilized the decision analysis process described in this paper in its managemLMit decisionmaking process associated with a new 500 kV transmission interconnection. The study helped to clarify our objectives and identify strategics best suited to meet those objectives."
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