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Optimal Dynamic Management of a Renewable Energy Source under Uncertainty

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  • BOBTCHEFF Catherine

    (LERNA, University of Toulouse)

Abstract

We consider a risk averse planner who has access to different energy sources to produce electricity; hydroelectricity is produced with a dam and thermal electricity is obtained from an unlimited supply at some exogenous cost. The dam is supplied with a random water ow. The presence of constraints on a minimal and maximal storage capacity makes electricity consumption smoothing possible only when the quantity of water available to the agent lies in a certain range that is determined. Consumption smoothing is possible even when the dam is almost empty thanks to the alternative costly energy source. Moreover, a comparative statics analysis reveals that the marginal propensity to produce hydroelectricity is an increasing function of the cost of the second technology. Therefore, the availability of the fossil source at a low cost improves time diversification. Finally, the optimal electric park is composed of a number of dams that increases with the cost of the alternative technology.
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Suggested Citation

  • BOBTCHEFF Catherine, 2006. "Optimal Dynamic Management of a Renewable Energy Source under Uncertainty," LERNA Working Papers 06.21.214, LERNA, University of Toulouse.
    • Handle: RePEc:ler:wpaper:06.21.214
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    References listed on IDEAS

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    Cited by:

    1. Durmaz, Tunç, 2016. "Precautionary Storage in Electricity Markets," Discussion Papers 2016/5, Norwegian School of Economics, Department of Business and Management Science.
    2. Tunç Durmaz, 2018. "Energy Storage and Renewable Energy: An Economic Approach," Yildiz Social Science Review, Yildiz Technical University, vol. 4(1), pages 15-38.
    3. Robles, Jack, 2016. "Infinite horizon hydroelectricity games," Working Paper Series 19421, Victoria University of Wellington, School of Economics and Finance.
    4. Robles, Jack, 2016. "Infinite horizon hydroelectricity games," Working Paper Series 5075, Victoria University of Wellington, School of Economics and Finance.

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