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A data envelopment analysis based evaluation of sustainable energy generation portfolio scenarios

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  • Turkson, Charles
  • Liu, Wenbin
  • Acquaye, Adolf

Abstract

Generating secure, affordable, and clean energy requires careful evaluation of the costs and associated risks of different energy generation sources. Portfolio optimisation models are commonly used in this regard to help diversify risks associated with generation sources. In recent times, energy policies often require the consideration of the environmental and social effects of such activity. Consequently, sustainability has become a key factor in making energy mix planning decisions. To incorporate sustainability considerations in energy mix planning, the conventional approach has been to add indicators for environmental and social costs to the total generation cost for each available technology in a portfolio optimisation model. However, this approach to developing a sustainable generation mix may not effectively address all dimensions of sustainability. In most cases, the economic dimension is prioritised over social and environmental factors. We examine how various aggregation methods impact the preference among the sources and the optimal portfolio mix and propose aggregation methods that effectively incorporate all sustainability dimensions. We observed that technology ranking based on multiplicative, pairwise interaction, and multilinear aggregation options aligns better with our sustainability goals than additive aggregation. By adopting these methods of aggregation, we were able to include more renewable and clean energy sources in our optimal portfolios.

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  • 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).
  • Handle: RePEc:eee:appene:v:363:y:2024:i:c:s0306261924004008
    DOI: 10.1016/j.apenergy.2024.123017
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    More about this item

    Keywords

    Data envelopment analysis; Sustainable energy systems; Portfolio optimisation; Energy mix; Electricity generation; Cost aggregation;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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