Efficient provision of electricity for the United States and Switzerland
AbstractThis study applies financial portfolio theory to determine efficient frontiers in the provision of electricity for the United States and Switzerland. Expected returns are defined by the rate of productivity increase of power generation (adjusted for external costs), volatility, by its standard deviation. Since unobserved productivity shocks are found to be correlated, Seemingly Unrelated Regression Estimation (SURE) is used to filter out the systematic component of the covariance matrix of the productivity changes. Results suggest that as of 2003, the feasible maximum expected return (MER) electricity portfolio for the United States contains more Coal, Nuclear, and Wind than actual but markedly less Gas and Oil. The minimum variance (MV) portfolio contains markedly more Oil, again more Coal, Nuclear, and Wind but almost no Gas. Regardless of the choice between MER and MV, U.S. utilities are found to lie substantially inside the efficient frontier. This is even more true of their Swiss counterparts, likely due to continuing regulation of electricity markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Socioeconomic Institute - University of Zurich in its series SOI - Working Papers with number 0812.
Length: 24 pages
Date of creation: Oct 2008
Date of revision: Dec 2011
Efficiency frontier; energy; electricity; portfolio theory; Seemingly Unrelated Regression Estimation (SURE);
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser).
If references are entirely missing, you can add them using this form.