EconPapers    
Economics at your fingertips  
 

Fuel mix diversification incentives in liberalized electricity markets: A Mean-Variance Portfolio theory approach

Fabien Roques (), David M Newbery () and William Nuttall ()

Energy Economics, 2008, vol. 30, issue 4, 1831-1849

Abstract: Monte Carlo simulations of gas, coal and nuclear plant investment returns are used as inputs of a Mean-Variance Portfolio optimization to identify optimal base load generation portfolios for large electricity generators in liberalized electricity markets. We study the impact of fuel, electricity, and CO2 price risks and their degree of correlation on optimal plant portfolios. High degrees of correlation between gas and electricity prices - as observed in most European markets - reduce gas plant risks and make portfolios dominated by gas plant more attractive. Long-term power purchase contracts and/or a lower cost of capital can rebalance optimal portfolios towards more diversified portfolios with larger shares of nuclear and coal plants.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (127) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140-9883(07)00147-8
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Fuel mix diversification incentives in liberalised electricity markets: a Mean-Variance Portfolio Theory Approach (2006) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:30:y:2008:i:4:p:1831-1849

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

 
Page updated 2021-03-28
Handle: RePEc:eee:eneeco:v:30:y:2008:i:4:p:1831-1849