Optimal Investment in Electricity Generation under Mean-Variacne Criteria

Authors

  • Qingyue Wang

DOI:

https://doi.org/10.54097/rz4f8097

Keywords:

Mean-variance; portfolio theory in energy sector; locational marginal pricing (LMP).

Abstract

This study introduces an application of mean-variance optimization, a common risk management technique in financial markets, to the New England area electricity market. The research optimizes portfolio selection in energy markets, treating 24 hourly intervals as distinct assets, and utilizes historical data from ISO New England hourly locational prices from 2022 to 2023. The study demonstrates the application of mean-variance optimization model across cases for hydroelectric and gas turbine combined power plants, providing generation companies with strategies to optimize their portfolio selection. This approach allows companies to make informed decisions about when and how to sell their power, aligning with their risk and return preferences. The research findings suggest that this optimization method can offer a systematic framework for generation companies to navigate the volatile electricity market and manage the risk and return.

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References

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Published

29-03-2024

How to Cite

Wang, Q. (2024). Optimal Investment in Electricity Generation under Mean-Variacne Criteria. Highlights in Science, Engineering and Technology, 88, 1157-1166. https://doi.org/10.54097/rz4f8097