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Diversification criteria for power systems

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  • Kharbach, Mohammed

Abstract

Growing power demand, fuel availability and prices, technology changes, the environmental impacts of energy consumption, the changing regulatory environments and the uncertainties around such elements make the planning for optimal power mix a challenging task. The diversity approach is advocated as a most appropriate planning methodology for the optimal energy mix (Hickey et al., 2010). Shannon Wiener Index (SWI), which is the most cited diversity metric has been used to assess power systems diversity mainly from an energy perspective. To our best knowledge, there is no rigorous justification why energy has been the main variable used in diversification exercises rather than other variables such as capacity. We use a stylized power generation framework to show that diversity based on energy or capacity could lead to different outcomes in terms of vulnerability to fuel exposure, among others. We also introduce a Shannon Wiener Index ratio (SWIR) that we believe captures better the diversity of a power system compared to the standard SWI.

Suggested Citation

  • Kharbach, Mohammed, 2016. "Diversification criteria for power systems," Energy Policy, Elsevier, vol. 90(C), pages 183-186.
    • Handle: RePEc:eee:enepol:v:90:y:2016:i:c:p:183-186
    DOI: 10.1016/j.enpol.2015.12.023
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    References listed on IDEAS

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    1. Frayer, Julia & Uludere, Nazli Z., 2001. "What Is It Worth? Application of Real Options Theory to the Valuation of Generation Assets," The Electricity Journal, Elsevier, vol. 14(8), pages 40-51, October.
    2. Costello, Ken, 2005. "A Perspective on Fuel Diversity," The Electricity Journal, Elsevier, vol. 18(4), pages 28-47, May.
    3. Delarue, Erik & De Jonghe, Cedric & Belmans, Ronnie & D'haeseleer, William, 2011. "Applying portfolio theory to the electricity sector: Energy versus power," Energy Economics, Elsevier, vol. 33(1), pages 12-23, January.
    4. Hanser, Philip & Graves, Frank, 2007. "Utility Supply Portfolio Diversity Requirements," The Electricity Journal, Elsevier, vol. 20(5), pages 22-32, June.
    5. Costello, Ken, 2007. "Diversity of Generation Technologies: Implications for Decision-Making and Public Policy," The Electricity Journal, Elsevier, vol. 20(5), pages 10-21, June.
    6. Hickey, Emily A. & Lon Carlson, J. & Loomis, David, 2010. "Issues in the determination of the optimal portfolio of electricity supply options," Energy Policy, Elsevier, vol. 38(5), pages 2198-2207, May.
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    Keywords

    Diversity; Electricity; SWI;
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