PITA Fiscal Year 2010 Projects - Product and Process Design and Optimization

Robust Planning Of The Production Of Liquid Gases Under Energy Uncertainty

Principal Investigators: Pietro Belotti, Lawrence V. Snyder, Ted K. Ralphs

We aim to model and solve the problem of planning the production of liquid gases under uncertainty. We consider an important type of uncertainty introduced by fluctuating energy prices. This uncertainty represents a substantial cost component of a production plant that relies heavily on electrical power.

This uncertainty can be controlled by choosing one among a list of possible contractual agreements that allow either a fixed energy price that is constant throughout the day, a fixed price with a given daily pattern, or a price defined as a random variable with mean and variance information. The cost of each contract reflects the corresponding type of energy price fluctuation.

The model we aim to develop considers all production patterns that satisfy a customer's demand, ensuring that the total expected production cost, computed over the uncertain energy price, is minimized.

This research will result in a modeling tool that will provide the most efficient production plan and, more importantly, help APC analyze, select, and negotiate energy contracts from power companies based on a comparison of energy price patterns. Furthermore, it will help evaluate the knowledge of fluctuating energy prices in the context of increasingly dynamic energy markets.

In addition, the funds requested will support Lehigh’s involvement in the Enterprise-Wide Optimization (EWO) research consortium, which consists of a multidisciplinary team from Carnegie Mellon and Lehigh Universities, working with 9 companies that are headquartered in or have significant operations in Pennsylvania.