IDEAS home Printed from https://ideas.repec.org/p/edn/sirdps/174.html
   My bibliography  Save this paper

The regional electricity generation mix in Scotland: A portfolio selection approach

Author

Listed:
  • Allan, Grant
  • Eromenko, Igor
  • McGregor, Peter
  • Swales, Kim

Abstract

Standalone levelised cost assessments of electricity supply options miss an important contribution that renewable and non-fossil fuel technologies can make to the electricity portfolio: that of reducing the variability of electricity costs, and their potentially damaging impact upon economic activity. Portfolio theory applications to the electricity generation mix have shown that renewable technologies, their costs being largely uncorrelated with non-renewable technologies, can offer such benefits. We look at the existing Scottish generation mix and examine drivers of changes out to 2020. We assess recent scenarios for the Scottish generation mix in 2020 against mean-variance efficient portfolios of electricity-generating technologies. Each of the scenarios studied implies a portfolio cost of electricity that is between 22% and 38% higher than the portfolio cost of electricity in 2007. These scenarios prove to be inefficient in the sense that, for example, lower variance portfolios can be obtained without increasing portfolio costs, typically by expanding the share of renewables. As part of extensive sensitivity analysis, we find that Wave and Tidal technologies can contribute to lower risk electricity portfolios, while not increasing portfolio cost.

Suggested Citation

  • Allan, Grant & Eromenko, Igor & McGregor, Peter & Swales, Kim, 2010. "The regional electricity generation mix in Scotland: A portfolio selection approach," SIRE Discussion Papers 2010-42, Scottish Institute for Research in Economics (SIRE).
    • Handle: RePEc:edn:sirdps:174
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10943/174
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. de Almeida, Pedro & Silva, Pedro D., 2009. "The peak of oil production--Timings and market recognition," Energy Policy, Elsevier, vol. 37(4), pages 1267-1276, April.
    2. Sanders, Dwight R. & Manfredo, Mark R. & Boris, Keith, 2009. "Evaluating information in multiple horizon forecasts: The DOE's energy price forecasts," Energy Economics, Elsevier, vol. 31(2), pages 189-196.
    3. H. Brett Humphreys & Katherine T. McClain, 1998. "Reducing the Impacts of Energy Price Volatility Through Dynamic Portfolio Selection," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 107-131.
    4. van Ruijven, Bas & van Vuuren, Detlef P., 2009. "Oil and natural gas prices and greenhouse gas emission mitigation," Energy Policy, Elsevier, vol. 37(11), pages 4797-4808, November.
    5. Siddharth Chandra, 2002. "A Test of the Regional Growth-Instability Frontier Using State Data," Land Economics, University of Wisconsin Press, vol. 78(3), pages 442-462.
    6. Leslie Hannah, 1982. "Engineers, Managers and Politicians," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-03446-8.
    7. Saunders, Harry D., 1984. "On the inevitable return of higher oil prices," Energy Policy, Elsevier, vol. 12(3), pages 310-320, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. de-Llano Paz, Fernando & Antelo, Susana Iglesias & Calvo Silvosa, Anxo & Soares, Isabel, 2014. "The technological and environmental efficiency of the EU-27 power mix: An evaluation based on MPT," Energy, Elsevier, vol. 69(C), pages 67-81.
    2. Chuang, Ming Chih & Ma, Hwong Wen, 2013. "Energy security and improvements in the function of diversity indices—Taiwan energy supply structure case study," Renewable and Sustainable Energy Reviews, Elsevier, vol. 24(C), pages 9-20.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Allan, Grant & Eromenko, Igor & McGregor, Peter & Swales, Kim, 2011. "The regional electricity generation mix in Scotland: A portfolio selection approach incorporating marine technologies," Energy Policy, Elsevier, vol. 39(1), pages 6-22, January.
    2. Mohammed, Abubakar Gambo & Elfeky, Karem Elsayed & Wang, Qiuwang, 2022. "Recent advancement and enhanced battery performance using phase change materials based hybrid battery thermal management for electric vehicles," Renewable and Sustainable Energy Reviews, Elsevier, vol. 154(C).
    3. Baumeister, Christiane & Kilian, Lutz & Lee, Thomas K., 2014. "Are there gains from pooling real-time oil price forecasts?," Energy Economics, Elsevier, vol. 46(S1), pages 33-43.
    4. Marina Yurievna Malkina, 2018. "Instability of Financial Return of Regional Economies and Its Determinants," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 3, pages 88-114.
    5. Bernard, Jean-Thomas & Khalaf, Lynda & Kichian, Maral & Yelou, Clement, 2018. "Oil Price Forecasts For The Long Term: Expert Outlooks, Models, Or Both?," Macroeconomic Dynamics, Cambridge University Press, vol. 22(3), pages 581-599, April.
    6. Christiane Baumeister & Lutz Kilian & Thomas K. Lee, 2017. "Inside the Crystal Ball: New Approaches to Predicting the Gasoline Price at the Pump," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(2), pages 275-295, March.
    7. Robert Millward, 2010. "The family silver, business efficiency and the City, 1970-1987," Business History, Taylor & Francis Journals, vol. 52(1), pages 169-185.
    8. Fuss, Sabine & Szolgayová, Jana & Khabarov, Nikolay & Obersteiner, Michael, 2012. "Renewables and climate change mitigation: Irreversible energy investment under uncertainty and portfolio effects," Energy Policy, Elsevier, vol. 40(C), pages 59-68.
    9. Nair, Sujith & Paulose, Hanna, 2014. "Emergence of green business models: The case of algae biofuel for aviation," Energy Policy, Elsevier, vol. 65(C), pages 175-184.
    10. Ruangpattana, Suriya & Preckel, Paul V. & Gotham, Douglas J. & Muthuraman, Kumar & Velástegui, Marco & Morin, Thomas L. & Uhan, Nelson A., 2012. "Diversification of fuel costs accounting for load variation," Energy Policy, Elsevier, vol. 42(C), pages 400-408.
    11. Zheng, Shuhong & Yang, Juan & Yu, Shiwei, 2021. "How renewable energy technological innovation promotes renewable power generation: Evidence from China's provincial panel data," Renewable Energy, Elsevier, vol. 177(C), pages 1394-1407.
    12. Gonzalo Cortazar & Cristobal Millard & Hector Ortega & Eduardo S. Schwartz, 2019. "Commodity Price Forecasts, Futures Prices, and Pricing Models," Management Science, INFORMS, vol. 65(9), pages 4141-4155, September.
    13. Huang, Yun-Hsun & Wu, Jung-Hua, 2008. "A portfolio risk analysis on electricity supply planning," Energy Policy, Elsevier, vol. 36(2), pages 627-641, February.
    14. Smith, James L., 2012. "On the portents of peak oil (and other indicators of resource scarcity)," Energy Policy, Elsevier, vol. 44(C), pages 68-78.
    15. van den Bergh, Jeroen C.J.M., 2012. "Effective climate-energy solutions, escape routes and peak oil," Energy Policy, Elsevier, vol. 46(C), pages 530-536.
    16. Meunier, Guy, 2013. "Risk aversion and technology mix in an electricity market," Energy Economics, Elsevier, vol. 40(C), pages 866-874.
    17. repec:use:tkiwps:11 is not listed on IDEAS
    18. Guy Meunier, 2014. "Risk Aversion and Technology Portfolios," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(4), pages 347-365, June.
    19. Escribano Francés, Gonzalo & Marín-Quemada, José María & San Martín González, Enrique, 2013. "RES and risk: Renewable energy's contribution to energy security. A portfolio-based approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 26(C), pages 549-559.
    20. Lang, Korbinian & Auer, Benjamin R., 2020. "The economic and financial properties of crude oil: A review," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    21. Isabel Figuerola‐Ferretti & Alejandro Rodríguez & Eduardo Schwartz, 2021. "Oil price analysts' forecasts," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(9), pages 1351-1374, September.

    More about this item

    Keywords

    Electricity generation mix; portfolio theory; regional energy policy;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:edn:sirdps:174. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Research Office (email available below). General contact details of provider: https://edirc.repec.org/data/sireeuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.