The regional electricity generation mix in Scotland: A portfolio selection approach
AbstractStandalone 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 â€œinefficientâ€ 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.
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Bibliographic InfoPaper provided by University of Strathclyde Business School, Department of Economics in its series Working Papers with number 1010.
Length: 49 pages
Date of creation: Mar 2010
Date of revision:
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Electricity generation mix; portfolio theory; regional energy policy;
Other versions of this item:
- 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).
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-ENE-2010-04-17 (Energy Economics)
- NEP-ENV-2010-04-17 (Environmental Economics)
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