ABSTRACT
The pure forecasting risk can be treated in a similar manner by the arbitrary but useful expedient of attributing a certain variance to forecasting errors in the light of experience and hope. Decision theory has no solution to the problem posed by non-probabilizable uncertainty. Thus, in the preparation of a background plan it seems that a set of plausible guesses about the future must be considered. Having dutifully mentioned uncertainty about prices and technology, this chapter concentrates upon the forecasting, weather and availability risks. Calculations concerned with optimizing the plant mix or the estimation of long-run marginal cost constitute the second topic where risk plays a part. These calculations involve simulating the future operation of a given system to meet an assumed load. An excess of mean available capacity over the mean expectation of demand under standard weather conditions will obviously reduce the risk of load reduction.
