A load factor based mean-variance analysis for fuel diversification
Fuel diversification implies the selection of a mix of generation technologies for long-term electricity generation. The goal is to strike a good balance between reduced costs and reduced risk. The method of analysis that has been advocated and adopted for such studies is the mean-variance portfolio analysis pioneered by Markowitz (Markowitz, H., 1952. Portfolio selection. Journal of Finance 7(1) 77-91). However the standard mean-variance methodology, does not account for the ability of various fuels/technologies to adapt to varying loads. Such analysis often provides results that are easily dismissed by regulators and practitioners as unacceptable, since load cycles play critical roles in fuel selection. To account for such issues and still retain the convenience and elegance of the mean-variance approach, we propose a variant of the mean-variance analysis using the decomposition of the load into various types and utilizing the load factors of each load type. We also illustrate the approach using data for the state of Indiana and demonstrate the ability of the model in providing useful insights.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bar-Lev, Dan & Katz, Steven, 1976. "A Portfolio Approach to Fossil Fuel Procurement in the Electric Utility Industry," Journal of Finance, American Finance Association, vol. 31(3), pages 933-47, June.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Shimon Awerbuch, 2006. "Portfolio-Based Electricity Generation Planning: Policy Implications For Renewables And Energy Security," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 11(3), pages 693-710, May.
- Boris Krey & Peter Zweifel, 2006. "Efficient Electricity Portfolios for Switzerland and the United States," SOI - Working Papers 0602, Socioeconomic Institute - University of Zurich.
- 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.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:31:y:2009:i:2:p:249-256. See general 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: (Zhang, Lei)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.