Capacity and Operational Performance Optimization under External Constraints with Uncertainty
Abstract
This thesis presents novel models to investigate the significant impacts of globalization, demand uncertainty, competition, and external emissions regulations on firms' profitability, operational performance, and decision-making processes. The models relax common simplifying assumptions (i.e., deterministic lead-times, exogenous emissions permit price) to better represent real market characteristics and applications. Specifically, these models are developed in the context of maritime shipments of fuels, such as Liquefied Natural Gas (LNG), to supply global energy markets.
The transport capacity investment problem is studied in terms of a mixed integer nonlinear model to maximize a single firm's profit. Using a proposed heuristic algorithm, the model determines the optimal number and size of tankers to deliver a single product under demand uncertainty. The model incorporates economies of scale, lost sales penalties, and the possibility of leasing extra capacity. Results show that tanker size and capacity utilization decrease if demand uncertainty increases. Moreover, tanker sizes are found to decrease as economies of scale decrease.
This model is extended to a duopoly setting under competition constrained by the cap-and-trade policy. It is treated as a nonlinear Cournot game and solved analytically to maximize firms' individual profits by determining their optimal production volumes. Furthermore, it provides a set of cap-and-trade policy characteristics (i.e., market cap, cap allocation rate, permit price) leading to the maximum total profit and increasing the trading possibility. Moreover, individual bounds on the ranges of these characteristics are determined within which trading occurs.
This model is modified for the carbon tax policy and is further extended to an oligopoly natural gas (NG) market to satisfy price-sensitive NG demand in the Chinese power sector. The supplied NG volume replaces a fraction of the coal consumption for electricity generation to investigate the economic and environmental implications of replacing coal with imported NG in its life cycle through an integrated Cournot game and life cycle assessment approach. The model is able to find a carbon price range under various sources of uncertainty involved in the market at which the import of NG to generate electricity is economically preferred compared to the coal-dominant Chinese power mix outlook.
Description
Keywords
Statistics, Energy, Engineering--Environmental, Engineering--Industrial, Engineering--Operations Research
Citation
Sabzevar, N. (2016). Capacity and Operational Performance Optimization under External Constraints with Uncertainty (Doctoral thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca. doi:10.11575/PRISM/25205