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The technological and environmental efficiency of the EU-27 power mix: An evaluation based on MPT

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  • de-Llano Paz, Fernando
  • Antelo, Susana Iglesias
  • Calvo Silvosa, Anxo
  • Soares, Isabel

Abstract

Portfolio Theory can result in a valid and contrasted methodology for evaluating real assets and electricity production portfolios within the construct of energy planning. It results in a more complete alternative to the least-cost perspective. In the proposed model the production costs of all technologies are considered, including the different components of externalities (not only CO2 costs). This tries to correct for possible market failure, due to imperfect cost allocation. Furthermore, the model measurement of technological risk is based on the non-weighted addition of variances. This proposal can be a more robust calculation to obtain risk values. The model presents a risk minimisation objective function and a cost–risk efficient frontier. Two different cases are proposed: “Pure Markowitz” (with only simple portfolio approach constraints) and “Technological Limitation” (considering the participation portfolio limits for technologies). It makes it possible to analyse the efficiency of IEA.EU-27 portfolios for year 2010 and 2020 and 2030 horizons from a Portfolio Theory perspective. The results are shown in terms of proximity to the Efficient Frontier and demonstrate how the “efficient minimum risk path” (economical and environmental) for EU-27 is essentially based on an increasing share of renewable sources in the power generation portfolio.

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  • 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.
  • Handle: RePEc:eee:energy:v:69:y:2014:i:c:p:67-81
    DOI: 10.1016/j.energy.2014.02.036
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    Cited by:

    1. Kosugi, Takanobu, 2016. "Endogenizing the probability of nuclear exit in an optimal power-generation mix model," Energy, Elsevier, vol. 100(C), pages 102-114.
    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. 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.
    4. deLlano-Paz, Fernando & Martínez Fernandez, Paulino & Soares, Isabel, 2016. "Addressing 2030 EU policy framework for energy and climate: Cost, risk and energy security issues," Energy, Elsevier, vol. 115(P2), pages 1347-1360.
    5. Andewi Rokhmawati, 2020. "The Nexus between Type of Energy Consumed, CO2 Emissions, and Carbon-Related Costs," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 172-183.
    6. deLlano-Paz, Fernando & Calvo-Silvosa, Anxo & Iglesias Antelo, Susana & Soares, Isabel, 2015. "The European low-carbon mix for 2030: The role of renewable energy sources in an environmentally and socially efficient approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 48(C), pages 49-61.
    7. Kosai, Shoki & Unesaki, Hironobu, 2020. "Short-term vs long-term reliance: Development of a novel approach for diversity of fuels for electricity in energy security," Applied Energy, Elsevier, vol. 262(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. Cartelle Barros, Juan José & Lara Coira, Manuel & de la Cruz López, María Pilar & del Caño Gochi, Alfredo & Soares, Isabel, 2020. "Probabilistic multicriteria environmental assessment of power plants: A global approach," Applied Energy, Elsevier, vol. 260(C).
    10. Forouli, Aikaterini & Gkonis, Nikolaos & Nikas, Alexandros & Siskos, Eleftherios & Doukas, Haris & Tourkolias, Christos, 2019. "Energy efficiency promotion in Greece in light of risk: Evaluating policies as portfolio assets," Energy, Elsevier, vol. 170(C), pages 818-831.

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    More about this item

    Keywords

    Portfolio theory; Electricity generation; Externalities; Energy policy;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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