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Issues in the determination of the optimal portfolio of electricity supply options

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  • Hickey, Emily A.
  • Lon Carlson, J.
  • Loomis, David

Abstract

In recent years a growing amount of attention has been focused on the need to develop a cost-effective portfolio of electricity supply options that provides society with a measure of protection from such factors as fuel price volatility and supply interruptions. A number of strategies, including portfolio theory, real options theory, and different measures of diversity have been suggested. In this paper we begin by first considering how we might characterize an optimal portfolio of supply options and identify a number of constraints that must be satisfied as part of the optimization process. We then review the strengths and limitations of each approach listed above. The results of our review lead us to conclude that, of the strategies we consider, using the concept of diversity to assess the viability of an electricity supply portfolio is most appropriate. We then provide an example of how a particular measure of diversity, the Shannon-Weiner Index, can be used to assess the diversity of the electricity supply portfolio in the state of Illinois, the region served by the Midwest Independent System Operator (MISO), and the continental United States.

Suggested Citation

  • Hickey, Emily A. & Lon Carlson, J. & Loomis, David, 2010. "Issues in the determination of the optimal portfolio of electricity supply options," Energy Policy, Elsevier, vol. 38(5), pages 2198-2207, May.
    • Handle: RePEc:eee:enepol:v:38:y:2010:i:5:p:2198-2207
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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.
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    6. Unni, Arjun C. & Ongsakul, Weerakorn & Madhu M., Nimal, 2020. "Fuzzy-based novel risk and reward definition applied for optimal generation-mix estimation," Renewable Energy, Elsevier, vol. 148(C), pages 665-673.
    7. Bigerna, Simona & D’Errico, Maria Chiara & Polinori, Paolo, 2021. "Energy security and RES penetration in a growing decarbonized economy in the era of the 4th industrial revolution," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
    8. deLlano-Paz, Fernando & Calvo-Silvosa, Anxo & Antelo, Susana Iglesias & Soares, Isabel, 2017. "Energy planning and modern portfolio theory: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 636-651.
    9. Fernando deLlano-Paz & Paulino Martinez Fernandez & Isabel Soares, 2016. "The effects of different CCS technological scenarios on EU low-carbon generation mix," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 18(5), pages 1477-1500, October.
    10. Chalvatzis, Konstantinos J. & Ioannidis, Alexis, 2017. "Energy supply security in the EU: Benchmarking diversity and dependence of primary energy," Applied Energy, Elsevier, vol. 207(C), pages 465-476.
    11. de-Llano Paz, Fernando & Antelo, Susana Iglesias & Calvo Silvosa, Anxo & Soares, Isabel, 2014. "The technological and environmental efficiency of the EU-27 power mix: An evaluation based on MPT," Energy, Elsevier, vol. 69(C), pages 67-81.
    12. Naraharisetti, Pavan Kumar & Karimi, I.A. & Anand, Abhay & Lee, Dong-Yup, 2011. "A linear diversity constraint – Application to scheduling in microgrids," Energy, Elsevier, vol. 36(7), pages 4235-4243.
    13. 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.
    14. Forouli, Aikaterini & Doukas, Haris & Nikas, Alexandros & Sampedro, Jon & Van de Ven, Dirk-Jan, 2019. "Identifying optimal technological portfolios for European power generation towards climate change mitigation: A robust portfolio analysis approach," Utilities Policy, Elsevier, vol. 57(C), pages 33-42.
    15. Ioannidis, Alexis & Chalvatzis, Konstantinos J. & Li, Xin & Notton, Gilles & Stephanides, Phedeas, 2019. "The case for islands’ energy vulnerability: Electricity supply diversity in 44 global islands," Renewable Energy, Elsevier, vol. 143(C), pages 440-452.
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    Electricity supply Diversity;

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