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Contribution Details

Type Master's Thesis
Scope Discipline-based scholarship
Title The Consequences of Environmental Policies on the Optimization of the German Energy Portfolio - A Quadratically Constrained Programming Model
Organization Unit
  • Andrea Staudacher
  • Thorsten Hens
  • English
Institution University of Zurich
Faculty Faculty of Economics, Business Administration and Information Technology
Date December 2014
Abstract Text The milestone in portfolio theory was laid by Markowitz (1952) based on mean variance portfolio optimization. Since Bar-Lev and Katz (1976) present a first application of portfolio theory to the electricity sector, it found numerous applications for optimizing generation mixes in specific countries. Existing research before Delarue et al. (2011), however, did not include multiple time periods, did not differentiate between installed capacity and electricity generation, include variable renewable energy sources and neither accounted for ramp restrictions. Furthermore, correlations between technologies were not taken into account. This thesis reflects Delarue et al.’s (2011) approach and hence correctly includes these parameters, that represent the characteristics of the real-life problems in the energy market, in the optimization of energy sources. In order to derive efficient portfolios, cost and risk on cost is considered both in absolute numbers [in EUR/MWh]. Consequently, a quadratically constrained programming model is written in matlab to solve the problem for the minimum cost portfolio with constraints on the cost risk that accounts for the risks of different technologies as well as correlations between them. In addition, environmental constraints, such as CO2 emission prices, the shutdown of nuclear power plants and a high share of renewable energy sources are included in the model. As a result, the introduced environmental policies on CO2 emissions and nuclear power both increase portfolio cost and risk compared to the optimal allocation in the German energy mix. In addition, the more restrictions on the conventional technologies, the more wind power contributes to the efficient allocations. A high and partly reliable wind profile reduces portfolio cost and risk. Consequently, implications for the major stakeholders in the Germany energy sector are drawn.
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