Operations Research in Energy Economics Winter Semester 2015/16

Exercise Sheet 4 Prof. Dr. Anke Weidlich

Topics: MILP

Exercises
1. An energy company has prepared six dierent investment projects with regular positive cash ows
in the future. It has calculated the net present value NPV of all projects. However, due to capital
constraints, it can only spend a maximum of 25 million Euro (Me) on investments in the coming year.
Project Description Outows / Me NPV / Me
1 Building a new decentralized power plant 7 5
2 Overhauling existing power plant 9.5 8.5
3 Automated control of existing p ower plant 12 9
4 Renew exhaust gas treatment plant 8 6
5 Building new heating grid line 6 5.5
6 Acquire shares of an o-shore wind park 7.5 6
Due to regulation, the company has to renew its exhaust gas treatment plant. The automated control
of the existing power plant can only be done if it is overhauled. Also, projects 5 and 6 exclude each
other (i. e. the company cannot do both simultaneously).
a) Which of the investment projects should it realize in order to maximize total NPV? Formulate
the optimization problem.
b) Suggest one method for solving the optimization problem.