The benefits of coordinated operation of hydro electric plants and thermal plants have now been recognized both in terms of the cost of power generation and the reliability of supply. A methodology based on an hierarchical use of two models is presented for operation planning of a hydro dominated power system. The first model is a hydro scheduling model based on stochastic dynamic progranning technique which finds an optimal monthly operation policy of a hydro plant with seasonal storage reservoir. The objective is to minimize the system operation cost. The second model is a probabilistic production costing (PPC) model suitable for simulation of power generation of a mixed hydrothermal system which is also used by the hydro scheduling model to calculate the system operation costs and reliabilty levels for different states and stages of its operation. The models are applied to the case of Nepal.
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