Valuing fuel diversification in optimal investment policies for electricity generation portfolios

摘要: Optimal capacity allocation for investments in electricity generation assets can be deterministically derived by comparing technology specific long‐term and short‐term marginal costs. In an uncertain market environment, Mean‐Variance Portfolio (MVP) theory provides a consistent framework to valuate financial risks power portfolios that allows derive the efficient fuel mix of system portfolio with different technologies from welfare maximization perspective.Because existing literature on MVP applications markets uses predominantly numerical methods characterize risks, this article presents novel analytical approach combining conceptual elements peak‐load pricing optimal consisting arbitrary number plant given prices. For purpose, we provide static optimization model which fully capture price mean variance framework. The analytically optimality conditions contribute much better understanding investment policy its risk characteristics compared methods. Furthermore, demonstrate application proposed results German has not yet been treated markets.