Electricity generation cost in isolated system: The complementarities of natural gas and renewables in the Canary Islands
The Canary Islands offer an example of an isolated electric grid of relative important size within the EU. Due to its peculiarities, the role of renewable energies and their complementarity with fossil fuels offers a solid path to achieving the main energy policy goals of the Islands. The purpose of this paper is to assess the current situation and the energy objectives proposed in the Energy Plan of the Canaries (PECAN, 2006) for the electricity industry, taking into account the average cost and the risk associated with the different alternatives for generating electricity by means of the Mean-Variance Portfolio Theory. Our analysis highlights the inefficiency of the current electricity generating mix in terms of cost, risk and lack of diversification. Shifting toward an efficient system would involve optimizing the use of endogenous energy sources and introducing natural gas to generate electricity. This scenario would mean reducing both cost and risk by almost 30% each, as well as atmospheric CO2 emissions. Our results agree with the PECAN philosophy.
Volume (Year): 14 (2010)
Issue (Month): 9 (December)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/600126/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/journaldescription.cws_home/600126/bibliographic|
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.:
- Perez, Yannick & Ramos Real, Francisco Javier, 2008. "How to make a European integrated market in small and isolated electricity systems? The case of the Canary Islands," Energy Policy, Elsevier, vol. 36(11), pages 4159-4167, November.
- Ramos-Real, Francisco Javier & Moreno-Piquero, Juan Carlos & Ramos-Henriquez, Jose Manuel, 2007. "The effects of introducing natural gas in the Canary Islands for electricity generation," Energy Policy, Elsevier, vol. 35(7), pages 3925-3935, July.
- Awerbuch, Shimon & Yang, Spencer, 2007. "Efficient electricity generating portfolios for Europe: maximising energy security and climate change mitigation," EIB Papers 7/2007, European Investment Bank, Economics Department.
- Feretic, Danilo & Tomsic, Zeljko, 2005. "Probabilistic analysis of electrical energy costs comparing: production costs for gas, coal and nuclear power plants," Energy Policy, Elsevier, vol. 33(1), pages 5-13, January.
- Perez, Yannick & Ramos-Real, Francisco Javier, 2009. "The public promotion of wind energy in Spain from the transaction costs perspective 1986-2007," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(5), pages 1058-1066, June.
- 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.
- Albrecht, Johan, 2007. "The future role of photovoltaics: A learning curve versus portfolio perspective," Energy Policy, Elsevier, vol. 35(4), pages 2296-2304, April.
- 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.
- Wiser, Ryan & Bachrach, Devra & Bolinger, Mark & Golove, William, 2004. "Comparing the risk profiles of renewable and natural gas-fired electricity contracts," Renewable and Sustainable Energy Reviews, Elsevier, vol. 8(4), pages 335-363, August.
- Weisser, Daniel, 2004. "Power sector reform in small island developing states: what role for renewable energy technologies?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 8(2), pages 101-127, April.
- Finn Roar Aune, Knut Einar Rosendahl and Eirik Lund Sagen, 2009.
"Globalisation of Natural Gas Markets - Effects on Prices and Trade Patterns,"
The Energy Journal,
International Association for Energy Economics, vol. 0(Special I), pages 39-54.
- Finn Roar Aune & Knut Einar Rosendahl & Eirik Lund Sagen, 2008. "Globalisation of natural gas markets - effects on prices and trade patterns," Discussion Papers 559, Statistics Norway, Research Department.
- Muñoz, José Ignacio & Sánchez de la Nieta, Agustín A. & Contreras, Javier & Bernal-Agustín, José L., 2009. "Optimal investment portfolio in renewable energy: The Spanish case," Energy Policy, Elsevier, vol. 37(12), pages 5273-5284, December.
- Haim Levy, 2004. "Prospect Theory and Mean-Variance Analysis," Review of Financial Studies, Society for Financial Studies, vol. 17(4), pages 1015-1041.
- Awerbuch, Shimon, 2000. "Investing in photovoltaics: risk, accounting and the value of new technology," Energy Policy, Elsevier, vol. 28(14), pages 1023-1035, November.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- 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.
- Shefrin, Hersh & Statman, Meir, 2000. "Behavioral Portfolio Theory," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(02), pages 127-151, June.
- Merton, Robert C., 1972. "An Analytic Derivation of the Efficient Portfolio Frontier," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(04), pages 1851-1872, September.
- 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.
- Blyth, William & Bradley, Richard & Bunn, Derek & Clarke, Charlie & Wilson, Tom & Yang, Ming, 2007. "Investment risks under uncertain climate change policy," Energy Policy, Elsevier, vol. 35(11), pages 5766-5773, November.
- Weisser, Daniel, 2004. "On the economics of electricity consumption in small island developing states: a role for renewable energy technologies?," Energy Policy, Elsevier, vol. 32(1), pages 127-140, January. Full references (including those not matched with items on IDEAS)