Decarbonizing OCP

Problem definition:  We present our collaboration with the OCP Group, one of the world's largest producers of phosphate and phosphate-based products, in support of a green initiative designed to significantly reduce OCP's carbon emissions. We study the problem of decarbonizing OCP's electricity supply by installing a mixture of solar panels and batteries to minimize its time-discounted investment cost plus the cost of satisfying its remaining demand via the Moroccan national grid. This collaboration forms the basis for a one billion USD investment in renewable energy generation by OCP.

Methodology/Results:  We immunize our model against deviations between forecast and realized solar generation output via a combination of robust and distributionally robust optimization. To account for variability in daily solar generation, we propose a data-driven robust optimization approach that prevents excessive conservatism by averaging across uncertainty sets. To protect against variability in seasonal weather patterns induced by climate change, we invoke distributionally robust optimization techniques. Under a ten billion MAD (approx. one billion USD) investment by OCP, the proposed methodology reduces the carbon emissions which arise from OCP's energy needs by more than 60% while lowering its time-adjusted operational costs over 20 years by approximately 80% (28 billion MAD). The proposed investment and operational strategies are robust to perturbations in the data, guaranteeing that the decarbonization process will be profitable even if OCP's estimates of solar generation are inaccurate.

Managerial Implications: To fulfill the Paris climate agreement, rapidly decarbonizing the global economy in a financially sustainable fashion is imperative. Accordingly, this work develops a robust optimization methodology that enables OCP to decarbonize at a profit by purchasing solar panels and batteries. Moreover, the methodology could be applied to decarbonize other industrial consumers. Indeed, our approach suggests that decarbonization's profitability depends on solar capacity factors, energy prices, and borrowing costs.



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