Beruflich Dokumente
Kultur Dokumente
Applied Energy
journal homepage: www.elsevier.com/locate/apenergy
School of Economics and Management, China University of Geosciences, Wuhan 430074, China
Center for Energy and Environmental Policy, University of Delaware, Newark 19711, USA
c
Department of Accounting, Finance and Information Systems, Eastern Kentucky University, Richmond 40475, USA
d
Center for Resources and Environmental Economic Research, China University of Geosciences, Wuhan 430074, China
b
h i g h l i g h t s
A DP model is proposed for investment decision-making of environmental projects.
The model can obtain the optimum investment strategy to meet the emission standard and to minimize costs.
The results show that the model is effective and applicable for investment decision-making.
a r t i c l e
i n f o
Article history:
Received 1 May 2015
Received in revised form 17 July 2015
Accepted 29 September 2015
Available online 23 October 2015
Keywords:
Coal mine
Pollution treatment
Dynamic programming
Investment decision-making
a b s t r a c t
Coal is the widespread fossil fuel on earth. It provides the necessary material foundation for economic
development of a country. However, coal mining activities cause a lot of environmental impacts that
are hazardous to the health of citizens in mining regions and place costs on the government.
According to government laws and regulations, coal mines should invest in related pollution treatment
projects to meet the emission standards. How to allocate the limited resources among a set of pollutant
treatment projects to minimize the total losses, including penal loss and vacancy loss, from an investment perspective is a typical decision-making problem. Therefore, the present study proposed a discrete
dynamic programming procedure to provide an effective solution for decision-making in treatment
project investment. Furthermore, a case study involving the Laojuntang coal mine of Zhengzhou Coal
Industry (Group) of China on the treatment project investment problem was implemented using the
proposed model. The results demonstrate that the proposed model is effective and applicable for environmental investment decision-making at a typical coal mine in terms of minimizing the total losses.
2015 Elsevier Ltd. All rights reserved.
1. Introduction
As the most abundant fossil fuel on the planet, coal provided
around 29.0% of the global primary energy need and generated
about 40.4% of the worlds electricity in 2012 [1]. Coal mining is
one of the core industries that contribute to the economic development of a country. However, coal production usually causes serious
damage to the environment, including impacts on groundwater
quantity and quality, land subsidence, mining waste stockpiling,
land occupation and other effects [2,3]. Take China as an example.
The production of coal was 3.6 billion tonnes in 2013, accounting
for up to 45.5% of global yields [1]. As a result, large quantities of
Corresponding author at: School of Economics and Management, China
University of Geosciences, Wuhan 430074, China. Tel.: +86 027 67883215;
fax: +86 027 67883201.
E-mail addresses: swyu@udel.edu, ysw81993@sina.com (S. Yu).
http://dx.doi.org/10.1016/j.apenergy.2015.09.099
0306-2619/ 2015 Elsevier Ltd. All rights reserved.
274
strategy [17], and the portfolio of IT projects problem decisionmaking [18]. There are also several studies applying DP to find global optimum decision-making in energy systems. These studies
can be divided into three broad categories: (1) DP optimization
decision-making in electrical distribution systems. For example,
Khalesi et al. applied dynamic programming to discover the optimal locations to place distributed generations (DGs) in a distribution system to minimize the power loss of the system and enhance
the reliability and voltage profile [19]. Ganguly et al. presented a
DP to solve the multi-objective optimization planning of electrical
distribution systems [20]. Marano et al. applied the DP technique
to the optimal management of a hybrid power plant, which consists of compressed air energy storage (CAES) coupled with a wind
farm and photovoltaic panels, taking into account energy, economic and environmental aspects [21]. (2) DP optimization applications in energy storage systems management. This kind of study
can be represented as follows. Liang et al. proposed a long-term
operation optimization model of a Pumped-Hydro Power Storage
(PHPS) station based on approximate DP [22]. For deriving the best
configuration and energy split strategies, Song et al. utilized the DP
approach to deal with the integrated optimization problem of a
hybrid energy storage system that includes a battery and a supercapacitor for an electric city bus [23]. To achieve the optimal
energy allocation for the engine-generator, battery and ultracapacitor of a plug-in hybrid electric vehicle, Zhang and Xiong employed
a DP model to develop suboptimal control strategies for different
driving blocks [24]. Furthermore, Fares et al. applied DP technique
for optimizing fuel cell hybrid vehicles [25]. (3) DP optimal
decision-making in oil stockpile strategy. Wu et al. presented a
dynamic programming model to determine the optimal stockpiling
and drawdown strategies for Chinas strategic petroleum reserve
under various scenarios, focusing on minimizing the total cost of
reserves [26]. Bai et al. applied DP to optimize a stockpile strategy
for Chinas emergency oil reserve by minimizing stockpiling costs,
including consumer surplus as well as crude acquisition and holding costs [27]. Besides these three categories, kugor and Deur proposed a DP optimization method for aggregate battery charging for
an electric vehicle fleet. They claimed that the DP method could
lead to global optimal results for the applications [28]. Li et al. proposed a DP model for optimal control of a wave energy converter
[29]. Although DP is very popular in many decision-making issues,
less attention has been drawn towards dealing with environmental
investment decision-making.
Therefore, our objective in this paper is to develop a multistage
discrete dynamic programming procedure for investment decisionmaking in coal mine pollution treatment in China. There are two
reasons for us using the DP method to solve the environmental
investment decision-making problem in coal mining. First, the
decision-making on investment in pollutant treatment projects has
obvious dynamic stages, which decision of each stage constitutes
entire decision-series of the problem. Second, it can always be
guaranteed that DP will find the optimal global solution [21]. In
the proposed procedure, the DP transforms the complex investment
decision-making problem into a sequence of interrelated subproblems arranged in stages while considering the constraints of the
amount and types of pollution as well as the treatment capacity of
projects and capital limit. Furthermore, a case study of a pollution
treatment project investment problem at the Laojuntang coal mine
of Zhengzhou Coal Industry (Group) is implemented.
2. Problem statement
2.1. Pollutants and their treatment of coal production
The activities of coal production and utilization include mining,
preparation and combustion of coal-fired boilers for heating.
Gangue
Utilization:building materials
Methane
Centralized collection:fuel
Waste water
dust
SO2
CO2,NOx,PMx
Desulfurization equipment
275
Mining
Preparation
Combustion
276
TI
LO1j
tj ptj
Dk Sk ; X k
Dynamic programming starts with a small portion of the original problem to find the optimal solution for this small problem. It
then gradually enlarges the problem to find the current optimal
solution from the previous stage, until the original problem is
solved in its entirety. Based on the discussions in Section 2, in year
t to year T, the model adapts to the project and capital constraints
as well as the optimal investment policy, and is independent from
previous decisions. In this particular application, the DP is designed
to find the optimum investment strategy of treatment projects
such that the emission standard of pollutants is met and the total
costs (including vacancy costs and penalties) are minimal. Let each
year be the state space that satisfies the Markov Property; we
establish the following dynamic programming models based on
the dynamic programming principle:
(1) Stage (k): the state variables represent the state of the system as it moves through the treatment levels. Since the
interval of pollution treatment investment projects is on a
yearly basis, the present paper divides the stage by years.
Therefore, index k represents a given stage for each year,
k 1; 2; . . . ; T.
(2) State (Sk ): The coal pollution investment loss is directly
related to the capacity of pollution treatment in each stage.
And the treatment capacity is influenced by whether project
j is put into operation or not in a particular stage. Therefore,
the state variable Sk is set to be the treatment capacity of
pollutant j at stage k, namely,
LOkj PN kj
j1
M
X
PL0kj
0
if ski;j pki;j 6 0
; i 1; 2; . . . ; N2j
PLk1;j PLk2;j . . . PLki;j if ski;j pki;j > 0
5
(5) Transformation function (T k Sk ; X k ): This function
T k Sk ; X k shows how the treatment capacity of pollutants
in stage k changes to the next stage k 1 based on the current state, stage and decision-making.
Sk1 T k Sk ; X k Sk X k
f 0 S0 0
k 1; 2; . . . ; T
277
Table 1
Investment, construction period and pollution treatment capacity.
Investment (million yuan)
Project
Project
Project
Project
Project
1
2
3
4
5
Pollution treatment
1st year
2nd year
3.50
5.10
4.00
2.50
7.10
4.00
3.20
3.70
2.50
6.50
3rd year
4th year
1.80
4.80
1.80
3.20
4.00
Table 2
All estimated pollution emissions in the future (unit: tonne).
Coal-bed methane
Mine water
Fly-ash and dust
SO2
Gangue
Total
Capacity (tonne)
7.50
12.00
12.50
5.00
10.80
110
350
180
90
300
Table 3
Penalty per pollution emission.
2016
2017
2018
2019
2020
2021
Year
2016
2017
2018
2019
2020
2021
47
100
100
30
140
63
140
120
41
175
76
180
140
50
210
85
220
155
63
245
90
290
165
75
270
105
350
178
88
290
Penalty (Yuan/tonne)
1.0
1.5
3.0
4.7
5.5
6.5
periods. This determines the investment arrangement for all projects, but does not consider which project to invest in. Therefore,
the daily operating costs of completed treatment projects and the
pollutant recycling benefits are beyond the scope of the current
study, and are considered to be exogenous factors. These factors
do not directly impact the loss decision-making.
4. Case study
4.1. A brief introduction to the Laojuntang coal mine
Zhengzhou Coal Industry (Group) Co., Ltd. (ZCIG) was established in 1958. It later became a part of Zhengzhou Coal Industry
& Electric Power CO., Ltd. in 1997, and was listed on the Shanghai
Stock Exchange as Zhenzhou Coal Industry & Electric Power,
which was the first stock of a state-owned coal company. The coal
recoverable reserves of ZCIG are 1.0 billion tonnes and the current
coal production capacity is 27 million tonnes with about 54,000
employees in 2012. ZCIG ranks 30th in the Top 100 coal mining
companies in China reported by the China Coal Industry Association and are one of the major companies in Henan province. Furthermore, it plays an important role in the Yuxi coal base, which
is one of the 13 state-planned large-scale coal bases in China. There
are 14 leading coal mines in ZCIG, among which the Laojuntang
mine is the newest leading coal mine, having started construction
in 2003. Phase III construction of the mine is planned for 2016,
with the aim of gradually increasing annual coal production from
450,000 tonnes in 2014 to the maximum design production of
600,000 tonnes in 2021.
4.2. Data
The coal mine plans to invest in five pollutant treatment projects during the period from 2016 to 2021 in accordance with
278
Table 4
Actual project investment per newly added treatment capacity (104 Yuan/tonne).
Project
Investment
11.68
5.25
12.74
7.80
12.27
(4) Stage 4 (k 4)
In
this
(3) Stage 3 (k 3)
The state of stage 3 is S3 S2 X 2 0:40; 0:70; 0:80; 0:20; 1:00T .
Since projects 1 and 4 can be completed at the end of stage 2, the
treatment capacity of pollutants 1 and 4 can be increased in the
present stage. Therefore, there are four feasible solutions depend1
3
X 3 0;0;0;0:7;0T
3
X 3 0:7;0;0;0:7;0T .
and
Based on these four feasible solutions, the contribution function
value and optimal objective value can be computed as shown in
Table 5.
Table 5 shows that the optimal objective function is feasible 4
and the minimum total loss from stage 1 to the end of stage 3 is
13.31 million yuan. Feasible 4 indicates that the coal mine should
Table 5
The feasible solutions of stage 3.
Variables
Feasible 1
Feasible 2
Feasible 3
Feasible 4
Vacancy project
P
Vacancy capacity
j s3j p3j
P
Vacancy loss
j LO3j
1
34
4
40
1, 4
74
22.6264
14.1438
36.7702
1, 2, 3, 4, 5
346
2, 3, 4, 5
310
1, 2, 3, 5
316
2, 3, 5
280
D3 S3 ; X 3
f 2 S2
f 3 S3
*
10.38
9.30
9.48
8.40
10.38
45.1
14.89
95.26
45.1
14.03
96.58
45.1
14.16
88.04
45.1
13.31
279
280
Table 6
The optimal investment decision-making.
Investment (million yuan)
2016
Project
Project
Project
Project
Project
Total
1
2
3
4
5
2017
5.10
3.20
7.10
12.2
2.50
6.50
12.2
2018
1.80
4.00
2.50
3.20
11.5
2019
2020
3.50
1.80
3.70
4.00
4.00
13
2021
References
4.80
8.8
with a total investment loss of 0.46 million yuan in the present stage.
The total penalty for substandard pollution emissions is 7.95 million
yuan.
(6) Stage 6 (k 6)
Similar to stage 5, construction of all projects can be completed at
the beginning of stage 6. With the composition and financial constraints, there are 55 feasible solutions for stage 6 based on the combination of newly added capacity and investment capital constraint.
The loss of each solution can be calculated by Eqs. (3)(5), as shown
in Fig. 3. Fig. 3 indicates that the minimal total loss is f 6 S7 42:86
million yuan from stage 1 to stage 6. The vacancy loss is 0.73 million
yuan while the penalty loss is 42.13 yuan. The optimal strategy of
the present stage is to add a treatment capacity of 1.80 million tonnes for pollutants 2 and 6 in stage 6 based on the optimal policy in
stage 5. In Fig. 3, the data on line or slash represents the project
numbers of pollution disposal in the beginning of the present stage
(project j); the data in the boxes is the new added treatment capacity
at the end of the present stage (X k ); and the data beside the boxes
gives the investment losses of pollution treatment in the present
stage from the stage one (f k Sk ).
According to the optimal policy in stage 6, the optimal investment decision-making is listed in Table 6.
Table 6 indicates that coal mines should invest in project 1 in
2019, project 2 in 2016, project 3 in 2018, project 4 in 2017 and
project 5 in 2016.
5. Conclusions
Investment in a pollution treatment project is a medium- to
long-term strategic plan for coal mines. It involves many factors
such as the amount of pollutants, the penalty cost for substandard
emissions, projects construction periods and capital constraints.
How to make an optimal investment decision on pollution treatment projects is a very important issue in the clean-coal production process. The optimal strategy must minimize the economic
losses caused by the mismatch between the pollutants and the
treatment capacity of projects. Therefore, the present study proposed a dynamic programming model of pollution treatment project investment based on the pollutants in the coal production. The
proposed model divided the complex multistage investment decision problem into a series of simple subproblems, and a forward
recursive method was utilized to solve the model. A case study
of the pollution treatment investment decision problem of the Laojuntang coal mine of Zhengzhou Coal Industry (Group) was implemented using the proposed model. The case study results show
that the model is effective and is applicable for a typical Chinese
coal mine environmental investment decision-making problem.
Acknowledgments
The authors gratefully acknowledge the financial support from
the National Natural Science Foundation of China under Grant
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