Power System Portfolio Selection and CO 2 Emission Management Under Uncertainty Driven by a DNN-Based Stochastic Model

Carlo Mari (), Carlo Lucheroni, Nabangshu Sinha and Emiliano Mari
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Carlo Mari: Department of Economics, Engineering, Society, Business Organization, University of Tuscia, 01100 Viterbo, Italy
Carlo Lucheroni: School of Sciences and Technology, University of Camerino, 62032 Camerino, Italy
Nabangshu Sinha: International School of Advanced Studies, University of Camerino, 62032 Camerino, Italy
Emiliano Mari: SYDUS, 05018 Orvieto, Italy

Mathematics, 2025, vol. 13, issue 9, 1-23

Abstract: A model is proposed to investigate the effects of power generation source diversification and CO 2 emission control in the presence of dispatchable fossil fuel sources and non-dispatchable carbon-free renewables. In a stochastic environment in which three random factors are considered, namely fossil fuels (gas and coal) and CO 2 prices, we discuss a planning methodology for power system portfolio selection that integrates the non-dispatchable renewables available in a given energy system and optimally combines cost, risk and CO 2 emissions. By combining the deep neural network probabilistic forecasting of fossil fuel path prices with a geometric Brownian motion model for describing the CO 2 price dynamics, we simulate a wide range of plausible market scenarios. Results show that under CO 2 price volatility, optimal portfolios shift toward cleaner energy sources, even in the absence of explicit emission targets, highlighting the implicit regulatory power of volatility. The results suggest that incorporating CO 2 price volatility through market mechanisms can serve as an effective policy tool for driving decarbonization. Our model offers a flexible and reproducible approach to support policy design in energy planning under uncertainty.

Keywords: power system; generation portfolio; deep neural network; CO 2 price volatility; CVaRD; portfolio frontier (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2025
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