The Regional Electricity Generation Mix in Scotland: a Portfolio Selection Approach

Research output: Working paperDiscussion paper

Abstract

Standalone levelised cost assessments of electricity supply options miss an important contribution that renewable and non-fossil fuel technologies can make to the electricity portfolio: that of reducing the variability of electricity costs, and their potentially damaging impact upon economic activity. Portfolio theory applications to the electricity generation mix have shown that renewable technologies, their costs being largely uncorrelated with non-renewable technologies, can offer such benefits. We look at the existing Scottish generation mix and examine drivers of changes out to 2020. We assess recent scenarios for the Scottish generation mix in 2020 against mean-variance efficient portfolios of electricity-generating technologies. Each of the scenarios studied implies a portfolio cost of electricity that is between 22% and 38% higher than the portfolio cost of electricity in 2007. These scenarios prove to be “inefficient” in the sense that, for example, lower variance portfolios can be obtained without increasing portfolio costs, typically by expanding the share of renewables. As part of extensive sensitivity analysis, we find that Wave and Tidal technologies can contribute to lower risk electricity portfolios, while not increasing portfolio cost.
LanguageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-49
Number of pages50
Volume10
Publication statusPublished - 2010

Fingerprint

Electricity
Costs
Portfolio selection
Electricity generation
Scotland
Sensitivity analysis
Economics
Scenarios

Keywords

  • electricity generation mix
  • portfolio theory
  • regional energy policy

Cite this

Allan, G., Eromenko, I., McGregor, P., & Swales, K. (2010). The Regional Electricity Generation Mix in Scotland: a Portfolio Selection Approach . (10 ed.) (pp. 1-49). Glasgow: University of Strathclyde.
@techreport{184704cfd09648bf86205c4abd67b5b3,
title = "The Regional Electricity Generation Mix in Scotland: a Portfolio Selection Approach",
abstract = "Standalone levelised cost assessments of electricity supply options miss an important contribution that renewable and non-fossil fuel technologies can make to the electricity portfolio: that of reducing the variability of electricity costs, and their potentially damaging impact upon economic activity. Portfolio theory applications to the electricity generation mix have shown that renewable technologies, their costs being largely uncorrelated with non-renewable technologies, can offer such benefits. We look at the existing Scottish generation mix and examine drivers of changes out to 2020. We assess recent scenarios for the Scottish generation mix in 2020 against mean-variance efficient portfolios of electricity-generating technologies. Each of the scenarios studied implies a portfolio cost of electricity that is between 22{\%} and 38{\%} higher than the portfolio cost of electricity in 2007. These scenarios prove to be “inefficient” in the sense that, for example, lower variance portfolios can be obtained without increasing portfolio costs, typically by expanding the share of renewables. As part of extensive sensitivity analysis, we find that Wave and Tidal technologies can contribute to lower risk electricity portfolios, while not increasing portfolio cost.",
keywords = "electricity generation mix, portfolio theory, regional energy policy",
author = "Grant Allan and Igor Eromenko and Peter McGregor and Kim Swales",
note = "Published as a paper within the Discussion Papers in Economics, No. 10-10 (2010)",
year = "2010",
language = "English",
volume = "10",
pages = "1--49",
publisher = "University of Strathclyde",
edition = "10",
type = "WorkingPaper",
institution = "University of Strathclyde",

}

The Regional Electricity Generation Mix in Scotland : a Portfolio Selection Approach . / Allan, Grant; Eromenko, Igor; McGregor, Peter; Swales, Kim.

10. ed. Glasgow : University of Strathclyde, 2010. p. 1-49.

Research output: Working paperDiscussion paper

TY - UNPB

T1 - The Regional Electricity Generation Mix in Scotland

T2 - a Portfolio Selection Approach

AU - Allan, Grant

AU - Eromenko, Igor

AU - McGregor, Peter

AU - Swales, Kim

N1 - Published as a paper within the Discussion Papers in Economics, No. 10-10 (2010)

PY - 2010

Y1 - 2010

N2 - Standalone levelised cost assessments of electricity supply options miss an important contribution that renewable and non-fossil fuel technologies can make to the electricity portfolio: that of reducing the variability of electricity costs, and their potentially damaging impact upon economic activity. Portfolio theory applications to the electricity generation mix have shown that renewable technologies, their costs being largely uncorrelated with non-renewable technologies, can offer such benefits. We look at the existing Scottish generation mix and examine drivers of changes out to 2020. We assess recent scenarios for the Scottish generation mix in 2020 against mean-variance efficient portfolios of electricity-generating technologies. Each of the scenarios studied implies a portfolio cost of electricity that is between 22% and 38% higher than the portfolio cost of electricity in 2007. These scenarios prove to be “inefficient” in the sense that, for example, lower variance portfolios can be obtained without increasing portfolio costs, typically by expanding the share of renewables. As part of extensive sensitivity analysis, we find that Wave and Tidal technologies can contribute to lower risk electricity portfolios, while not increasing portfolio cost.

AB - Standalone levelised cost assessments of electricity supply options miss an important contribution that renewable and non-fossil fuel technologies can make to the electricity portfolio: that of reducing the variability of electricity costs, and their potentially damaging impact upon economic activity. Portfolio theory applications to the electricity generation mix have shown that renewable technologies, their costs being largely uncorrelated with non-renewable technologies, can offer such benefits. We look at the existing Scottish generation mix and examine drivers of changes out to 2020. We assess recent scenarios for the Scottish generation mix in 2020 against mean-variance efficient portfolios of electricity-generating technologies. Each of the scenarios studied implies a portfolio cost of electricity that is between 22% and 38% higher than the portfolio cost of electricity in 2007. These scenarios prove to be “inefficient” in the sense that, for example, lower variance portfolios can be obtained without increasing portfolio costs, typically by expanding the share of renewables. As part of extensive sensitivity analysis, we find that Wave and Tidal technologies can contribute to lower risk electricity portfolios, while not increasing portfolio cost.

KW - electricity generation mix

KW - portfolio theory

KW - regional energy policy

M3 - Discussion paper

VL - 10

SP - 1

EP - 49

BT - The Regional Electricity Generation Mix in Scotland

PB - University of Strathclyde

CY - Glasgow

ER -