Mixed-integer bilevel optimization for capacity planning with rational markets

We formulate the capacity expansion planning as a bilevel optimization to model the hierarchical decision structure involving industrial producers and consumers. The formulation is a mixed-integer bilevel linear program in which the upper level maximizes the profit of a producer and the lower level minimizes the cost paid by markets. The upper-level problem includes mixed-integer variables that establish the expansion plan; the lower level problem is an LP that decides demands assignments. We reformulate the bilevel optimization as a single-level problem using two different approaches: KKT reformulation and duality-based reformulation. We analyze the performance of these reformulations and compare their results with the expansion plans obtained from the traditional single-level formulation. For the solution of large-scale problems, we propose improvements on the duality-based reformulation that allows reducing the number of variables and constraints. The formulations and the solutio...

• Type: Journal
• Year: 2016
• Where: CCE
• Authors: Pablo Garcia-Herreros, Lei Zhang, Pratik Misra, Erdem Arslan, Sanjay Mehta, Ignacio E. Grossmann
• Keywords: CCE 2016, Software Engineering