Optimal control of a dam under seasonal electricity prices (Q792875)

The study concerns the optimal control of a hydroelectric dam under seasonal (deterministic) electricity prices and independent, seasonal, stochastic inflows. The goal is to maximize the expected discounted return. It is shown that the optimal policy is determined by a critical water level in each period. It is also proved that if policies are defined by goal-levels, then this yields higher returns than the standard production-level approach.