Optimal sizing of projects in a hydro-based power system

The author considers the problem of obtaining the optimal design of hydroelectric power systems with respect to determining each project's optimal size or capacity. The problem of sizing projects is analyzed from a theoretical and economical standpoint, and a mathematical model is presented to examine project sizing in the general framework of expanding a purely hydroelectric system. The interaction between sizing and sequencing decisions is also discussed. The results give design rules for choosing the optimal size and marginal cost for individual projects, and show the interdependence of scaling and sequencing decisions. According to these rules, it is optimal to make the current marginal cost of each new project equal to the discounted weighted average of the long-term marginal unit cost for all future projects.>