A Study on the Optimal Generation Mix in Japan based on Portfolio Theory

M. Kato and Y. Zhou (Japan)


Power system planning, generation mix, portfolio theory, CO2 emission


This paper presents a novel method to analyze the optimal generation mix with considering risks and environmental measures in Japan. The proposed methods are based on portfolio theory which relates the expected portfolio return to the total portfolio risk defined as the standard deviation of return. Portfolio theory is integrated with screening curve analysis in order that electricity generation corresponds with load curve. Besides, we define a rate of return as net cash flow per capital investment of a generator in order to easily calculate the generation capacity mix. Environmental measures are evaluated through restrictions of CO2 emissions, which are indicated by CO2 price. Finally, numerical examples show its merits and advantages of this proposed method as following. Coal thermal power is included in the optimal generation mix at certain degree and nuclear power does not occupy so much when risks are considered. Due to its better thermal efficiency, IGCC is more favorable than USC, which has less fuel price risk and less CO2 price risk. However, if CO2 emissions are more restricted, IGCC will be replaced by CCS. Recently, renewable energy is more likely to be included because it has neither fuel price risk nor CO2 price risk.

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