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Valuing fuel diversification in power generation capacity planning

  • Sunderkötter, Malte
  • Weber, Christoph

Deterministic capacity planning problems in electricity systems can be solved by comparing technology specific long-term and short-term marginal costs. In an uncertain market environment, Mean-Variance Portfolio (MVP) theory provides a consistent framework to balance risk and return in power generation portfolios. Focusing on fuel price risks, MVP theory can be adopted to determine the welfare efficient system generation technology mix.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): 5 ()
Pages: 1664-1674

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Handle: RePEc:eee:eneeco:v:34:y:2012:i:5:p:1664-1674
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  1. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
  2. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
  3. Roques, F.A. & Nuttall, W.J. & Newbery, D.M., 2006. "Using Probabilistic Analysis to Value Power Generation Investments Under Uncertainty," Cambridge Working Papers in Economics 0650, Faculty of Economics, University of Cambridge.
  4. Fan, Lin & Hobbs, Benjamin F. & Norman, Catherine S., 2010. "Risk aversion and CO2 regulatory uncertainty in power generation investment: Policy and modeling implications," Journal of Environmental Economics and Management, Elsevier, vol. 60(3), pages 193-208, November.
  5. 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.
  6. 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.
  7. Roques, F.A. & Nuttall, W.J. & Newbery, D.M. & de Neufville, R., 2005. "Nuclear Power: a Hedge against Uncertain Gas and Carbon Prices?," Cambridge Working Papers in Economics 0555, Faculty of Economics, University of Cambridge.
  8. Roques, Fabien A. & Newbery, David M. & Nuttall, William J., 2008. "Fuel mix diversification incentives in liberalized electricity markets: A Mean-Variance Portfolio theory approach," Energy Economics, Elsevier, vol. 30(4), pages 1831-1849, July.
  9. Gotham, Douglas & Muthuraman, Kumar & Preckel, Paul & Rardin, Ronald & Ruangpattana, Suriya, 2009. "A load factor based mean-variance analysis for fuel diversification," Energy Economics, Elsevier, vol. 31(2), pages 249-256, March.
  10. Dennis Anderson, 1972. "Models for Determining Least-Cost Investments in Electricity Supply," Bell Journal of Economics, The RAND Corporation, vol. 3(1), pages 267-299, Spring.
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