Modern Portfolio Theory Applied to Electricity Resource Planning

Beltran, Hector A.

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Description

Title

Modern Portfolio Theory Applied to Electricity Resource Planning

Author(s)

Beltran, Hector A.

Issue Date

2009-06-01T16:04:56Z

Director of Research (if dissertation) or Advisor (if thesis)

Overbye, Thomas J.

Department of Study

Electrical and Computer Engineering

Discipline

Electrical and Computer Engineering

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

M.S.

Degree Level

Thesis

Keyword(s)

• Modern portfolio theory
• Electricity resource planning
• Efficient frontier
• Least-cost-variance methodology

Abstract

To meet electricity demand, electric utilities develop growth strategies for generation, transmission, and distributions systems. For a long time those strategies have been developed by applying least-cost methodology, in which the cheapest stand-alone resources are simply added, instead of analyzing complete portfolios. As a consequence, least-cost methodology is biased in favor of fossil fuel-based technologies, completely ignoring the benefits of adding non-fossil fuel technologies to generation portfolios, especially renewable energies. For this reason, this thesis introduces modern portfolio theory (MPT) to gain a more profound insight into a generation portfolio’s performance using generation cost and risk metrics. We discuss all necessary assumptions and modifications to this finance technique for its application within power systems planning, and we present a real case of analysis. Finally, the results of this thesis are summarized, pointing out the main benefits and the scope of this new tool in the context of electricity generation planning.

Graduation Semester

2009-5

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http://hdl.handle.net/2142/11970

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Copyright Hector A. Beltran

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