Linear programming based analysis of marginal cost pricing in electric utility capacity expansion

This paper concerns methods for discretizing and approximating the annual load duration curve in the context of a linear programming model and its interpretation in electric utility expansion planning. The emphasis is upon the interpretation of the linear programming dual variables and their relationship with classical results of peak load pricing. In particular, for capacity planning in which one can choose from a diverse number of technological alternatives, we support the work of Wenders by precisely characterizing how off-peak periods bear partial responsibility of the capacity cost.