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Addressing energy trilemma via the modified Markowitz Mean-Variance Portfolio Optimization theory

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  • Stempien, J.P.
  • Chan, S.H.

Abstract

Energy trilemma is one of the most pressing concerns on agendas of many governments and international organizations. In this paper, the authors propose a novel quantitative tool to aid designing policies for energy systems planning and creating research and developments programs aimed at achieving specific policy goals. The proposed modified Markowitz theory can be used to build the efficient plane considering sustainability, security and affordability of the energy system composed of a portfolio of competing technologies. The novel and original contribution of this paper is the extension of the Markowitz theory to include the measure of portfolio’s sustainability and proposing a new tool to tackle the energy trilemma. The proposed tool was used to compare policy packages to support possible steady green growth of Singapore economy – a densely populated city state with no natural resources, dynamic economy requiring secured supply of energy, and ambitions of being a leader in sustainable development. It was found that efforts aimed at simultaneous improving performance and lowering costs of novel technologies is more desirable, contrary to policy focusing on either alone. Fuel cells and solar photovoltaic panels were found to be important pieces of an efficient power generation portfolio.

Suggested Citation

  • Stempien, J.P. & Chan, S.H., 2017. "Addressing energy trilemma via the modified Markowitz Mean-Variance Portfolio Optimization theory," Applied Energy, Elsevier, vol. 202(C), pages 228-237.
    • Handle: RePEc:eee:appene:v:202:y:2017:i:c:p:228-237
    DOI: 10.1016/j.apenergy.2017.05.145
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    2. Paulino Martinez-Fernandez & Fernando deLlano-Paz & Anxo Calvo-Silvosa & Isabel Soares, 2019. "Assessing Renewable Energy Sources for Electricity (RES-E) Potential Using a CAPM-Analogous Multi-Stage Model," Energies, MDPI, vol. 12(19), pages 1-20, September.
    3. Zhao, Congyu & Dong, Kangyin & Lee, Chien-Chiang, 2024. "Carbon lock-in endgame: Can energy trilemma eradication contribute to decarbonization?," Energy, Elsevier, vol. 293(C).
    4. Fu, Yelin & Lai, Kin Keung & Yu, Lean, 2021. "Multi-nation comparisons of energy architecture performance: A group decision-making method with preference structure and acceptability analysis," Energy Economics, Elsevier, vol. 96(C).
    5. Turkson, Charles & Liu, Wenbin & Acquaye, Adolf, 2024. "A data envelopment analysis based evaluation of sustainable energy generation portfolio scenarios," Applied Energy, Elsevier, vol. 363(C).
    6. Han, Yong & Wang, Xue-sheng & Zhang, Zhao & Zhang, Hao-nan, 2020. "Multi-objective optimization of geometric parameters for the helically coiled tube using Markowitz optimization theory," Energy, Elsevier, vol. 192(C).
    7. Wu, Raphael & Sansavini, Giovanni, 2021. "Energy trilemma in active distribution network design: Balancing affordability, sustainability and security in optimization-based decision-making," Applied Energy, Elsevier, vol. 304(C).
    8. Zhang, Shuang & Zhao, Tao & Xie, Bai-Chen, 2018. "What is the optimal power generation mix of China? An empirical analysis using portfolio theory," Applied Energy, Elsevier, vol. 229(C), pages 522-536.
    9. Belén del-Río & Ana Fernández-Sainz & Itziar Martinez de Alegria, 2022. "Assessing the energy trilemma through the diversity of the energy mix: the case of India," SN Business & Economics, Springer, vol. 2(9), pages 1-26, September.
    10. Andrew Adewale Alola & Tomiwa Sunday Adebayo & Ifedolapo Olabisi Olanipekun, 2023. "Examining the Energy Efficiency and Economic Growth Potential in the World Energy Trilemma Countries," Energies, MDPI, vol. 16(4), pages 1-21, February.
    11. Alola, Andrew Adewale & Olanipekun, Ifedolapo Olabisi & Shah, Muhammad Ibrahim, 2023. "Examining the drivers of alternative energy in leading energy sustainable economies: The trilemma of energy efficiency, energy intensity and renewables expenses," Renewable Energy, Elsevier, vol. 202(C), pages 1190-1197.

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