Efficient electricity generating portfolios for Europe: maximising energy security and climate change mitigation
AbstractThis paper applies portfolio-theory optimisation concepts from the field of finance to produce an expository evaluation of the 2020 projected EU-BAU (business-as-usual) electricity generating mix. We locate optimal generating portfolios that reduce cost and market risk as well as CO2 emissions relative to the BAU mix. Optimal generating portfolios generally include greater shares of wind, nuclear, and other nonfossil technologies that often cost more on a standalone engineering basis, but overall costs and risks are reduced because of the portfolio diversification effect. They also enhance energy security. The benefit streams created by these optimal mixes warrant current investments of about Euro 250 - Euro 500 billion. The analysis further suggests that the optimal 2020 generating mix is constrained by shortages of wind, especially offshore, and possibly nuclear power, so that even small incremental additions of these two technologies will provide sizeable cost and risk reductions.
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Bibliographic InfoPaper provided by European Investment Bank, Economics Department in its series EIB Papers with number 7/2007.
Length: 30 pages
Date of creation: 25 Jun 2007
Date of revision:
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Efficient electricity portfolios; electricity generation; investment;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
- Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-17 (All new papers)
- NEP-ENE-2009-06-17 (Energy Economics)
- NEP-ENV-2009-06-17 (Environmental Economics)
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- Fernando de Llano Paz & Anxo Calvo Silvosa & Martín Portos García, 2012. "The Problem of Determining the Energy Mix: from the Portfolio Theory to the Reality of Energy Planning in the Spanish Case," European Research Studies Journal, European Research Studies Journal, vol. 0(Special I), pages 3-30.
- Lesser, Jonathan A. & Su, Xuejuan, 2008. "Design of an economically efficient feed-in tariff structure for renewable energy development," Energy Policy, Elsevier, vol. 36(3), pages 981-990, March.
- Stirling, Andy, 2010. "Multicriteria diversity analysis: A novel heuristic framework for appraising energy portfolios," Energy Policy, Elsevier, vol. 38(4), pages 1622-1634, April.
- Gustavo A. Marrero & Luis A. Puch & Francisco Javier Ramos-Real, 2010. "Riesgo y costes medios en la generación de electricidad: diversificación e implicaciones de política energética," Economic Reports 13-2010, FEDEA.
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