Cost Optimization of Large Scale Industries

A major problem faced by bulk power consumers is the fluctuation of pool prices. There are three sources of power. Spot Market, Bilateral Contracts and power from self-producing facilities. The cost of energy from later two sources is generally constant. But the cost of pool price is variable. Hence, this unreliability is the major cause of risk faced by large consumers. This problem is resolved by a program developed in GAMS Software. The practical scenario is optimized for amount of power to be taken from the three sources that fulfils the demand of power through the entire day. The bilateral contract is a �take-or-pay� situation in which once the price is decided it will not vary. Therefore this does not poses a risk, and hence not discussed here. The amount of power self-produced and cost incurred for that is discussed here. The risk of cost variance is calculated. Finally the total cost which is sum of all above parameters is optimized for best solution and minimizing the total cost. In the final equation i.e. the total cost a constant to balance the risk and cost is added. Finally the procurement mix is discussed in the theory for both high as well as low value of risk factor. Hence this method for cost calculation can be very helpful for large consumers to purchase the most efficient amount of energy from any of the three sources to make itself most profitable.