Economic-Based Optimization of Panama Canal System Operations

A network flow optimization model is developed to study the operations of the Panama Canal system. The prescriptive model chooses monthly reservoir releases and storage levels that maximize the overall benefit of the system. Solution of the model relies on penalty functions that relate value (either economic or noneconomic) to storage levels, releases, and flows in the system. Penalty functions are developed for the multiple purposes of the system, including water supply, navigation, hydroelectric power generation, and flood control. Patterns observed in the model results can serve as starting points to develop improved operating rules for the existing system, and the model can also help evaluate the potential benefits of structural changes to the system. The primary operational trade-off evaluated herein is between maximizing hydroelectric power generation and meeting navigation requirements with a high degree of reliability. Model results also provide some insights into the capacity expansion decisions faced by the Panama Canal Authority.