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

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

Energy, 2014, vol. 69, issue C, 67-81

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.

Keywords: Portfolio theory; Electricity generation; Externalities; Energy policy (search for similar items in EconPapers)
JEL-codes: G11 Q47 Q53 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0360544214001704
Full text for ScienceDirect subscribers only

Related works:
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:energy:v:69:y:2014:i:c:p:67-81

DOI: 10.1016/j.energy.2014.02.036

Access Statistics for this article

Energy is currently edited by Henrik Lund and Mark J. Kaiser

More articles in Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().