CAPACITY EXPANSION

Capacity expansion - This is an augmentation to any mathematical program that has constraints representing a capacity limit. Suppose g(x) <= b represents the limitation of using more than b units of capacity, where g(x) is the actual amount used for policy x. Then, this becomes a capacity expansion model by replacing the constraint with g(x) - vC <= b and 0 <= v <= 1. Here C is the maximum amount of new capacity, with vC the portion brought online by choice of v. This is also reflected in the objective function with an added cost term, say F(v), such that F(0)=0 and F increasing on [0, 1]. If continuous use of the capacity is not possible (i.e., one builds a new plant or not), the model further requires v to be binary-valued (0 or 1), and F(1) is called the fixed charge .