Investment Planning in Electricity Production Under CO2 Price Uncertainty

Transcription

1 Renzelas, Ahanasos and Tols, Ahanasos and Tasopoulos, Ilas (2010) Invesmen plannng n elecrcy producon under CO2 prce uncerany. In: Proceedngs of he 16h Inernaonal Workng Semnar on Producon Economcs. UNSPECIFIED, Innsbruck, Ausra, pp , Ths verson s avalable a hps://srahprns.srah.ac.uk/46336/ Srahprns s desgned o allow users o access he research oupu of he Unversy of Srahclyde. Unless oherwse explcly saed on he manuscrp, Copyrgh and Moral Rghs for he papers on hs se are reaned by he ndvdual auhors and/or oher copyrgh owners. Please check he manuscrp for deals of any oher lcences ha may have been appled. You may no engage n furher dsrbuon of he maeral for any profmakng acves or any commercal gan. You may freely dsrbue boh he url (hps://srahprns.srah.ac.uk/) and he conen of hs paper for research or prvae sudy, educaonal, or no-for-prof purposes whou pror permsson or charge. Any correspondence concernng hs servce should be sen o he Srahprns admnsraor: srahprns@srah.ac.uk The Srahprns nsuonal reposory (hps://srahprns.srah.ac.uk) s a dgal archve of Unversy of Srahclyde research oupus. I has been developed o dssemnae open access research oupus, expose daa abou hose oupus, and enable he managemen and perssen access o Srahclyde's nellecual oupu.

2 Invesmen Plannng n Elecrcy Producon Under CO2 Prce Uncerany Ahanasos A. Renzelas 1, Ahanasos I. Tols 2, Ilas P. Tasopoulos 3 Secor of Indusral Managemen and Operaonal Research, School of Mechancal Engneerng, Naonal Techncal Unversy of Ahens 15780, Zografou, Greece 1 aren@cenral.nua.gr 2 aol@cenral.nua.gr 3 a@cenral.nua.gr Absrac The elecrcy markes have undergone sgnfcan changes durng he las years. On he one hand, he marke deregulaon has ncreased sgnfcanly he uncerany on fuure elecrcy prces. On he oher hand, he Kyoo proocol and he esablshmen of emsson resrcons, as well as he developmen of emsson radng sysems has added anoher expense sream for convenonal fuel elecrcy producers and a poenal ncome sream for renewable elecrcy producers. The emsson allowance prces are anoher source of uncerany for elecrcy producers. The scope of hs work s o nvesgae he effec ha varous scenaros for emsson allowance prce evoluon may have on he orders for new elecrcy generaon echnologes and herefore, on he fuure elecrcy generaon mx of Greece. The renewable energy generaon arges are aken no consderaon as a consran of he sysem, and he learnng raes of he varous echnologes are ncluded n he calculaons. The naonal elecrcy generaon sysem s modelled for long-erm analyss and an opmsaon mehod s appled, n order o come up wh he opmal generang mx ha mnmses elecrcy generaon cos, whle sasfyng he naonal emssons reducon arges and ncorporang he uncerany of emsson allowance prces. In addon, an nvesgaon s made o denfy f a pon should be expeced when renewable energy wll be more profable han convenonal fuel elecrcy generaon. The work s neresng for nvesmen plannng n he elecrcy marke, as may provde drecons on whch echnologes are mos probable o domnae he marke n he fuure, and herefore are of neres o be ncluded n he fuure power porfolos of relaed nvesors. Keywords: nvesmen plannng, opmsaon, elecrcy marke, emssons marke 1. Inroducon Sraegc plannng for he medum- o long-erm expanson of he elecrcy generang capacy of a specfc counry has been an mporan ssue n he pas, when elecrcy markes were regulaed. The major concerns n regulaed markes were manly he dependence from mpored fuels, sably and relably of he ransmsson grd, as well as qualy and secury of supply. In recen years, he deregulaon of he elecrcy secor as well as he nroducon of envronmenal consrans, such as he reducon of greenhouse gas emssons and arges for peneraon of Renewable Energy Sources (RES) n he elecrcy generang mx, have added addonal consrans ha complcae furher he procedure of plannng. The man resul of he marke deregulaon s ha he major focus of he prvae nvesors s he generaon cos, snce n a compeve marke s much more probable o survve and acheve hgher yelds f one has lower generaon cos han hs compeors. Therefore, echnologes wh he lowes generaon cos are he mos advanageous for prvae nvesors. The man resul of he RES nroducon and he CO2 emssons radng sysem s he complcaon of he nvesmen decson as well as he addon of an exra expense sream for elecrcy generaors based on convenonal fuel sources, as hey have o purchase he emsson allowances hey requre. Expecaons abou fuure greenhouse gas allowance prces already nfluence curren decson makng, especally n he elecrcy secor, whch was one of he frs busness secors affeced. The effec of he allowance prces s n fac very dffcul o predc, as s severely nfluenced by polcal decsons, such as he operaon of he markes, he amoun of free allowances o be allocaed and he emsson reducon arges. Up

3 o now, allowance prces have been characersed by hgh uncerany and varably, hus makng any forecasng aemp very dcey. The scope of hs work s o nvesgae he effec ha varous scenaros for emsson allowance prce evoluon may have on he orders for new elecrcy generaon echnologes and herefore, on he fuure elecrcy generaon mx of Greece. The renewable energy generaon arges are aken no consderaon as a consran of he sysem, and he learnng raes of he varous echnologes are ncluded n he calculaons. The mehodology presened may be used for he elecrcy sysem of any counry. Nomenclaure Indces Descrpon Technologes ncluded n he sudy Years [2010,2050] Ses Descrpon REN Renewable echnologes CONV Convenonal echnologes Parameers Descrpon AI, Invesmen annues ( /MWel/year) Cf, Fuel cos ( /MWh fuel) Cco2 Forecased CO2 prce n year ( /n CO2) CO2, Toal emssons allowance cos for year and convenonal ech. ( /MWel) E Energy generaed yearly from unary capacy of echnology (MWh/MWel) Edem Energy demand n year (MWh) EGC, Average levelsed lfeme elecrcy generaon cos ( /MWh) Emco2 CO2 emssons of echnology (nco2/mwh elecr.) F, Toal fuel cos for year and echnology ( /MWel) I, Invesmen cos per un of capacy nsalled ( /MWel) OMf, Fxed Operaonal & Manenance coss ( /MWel) OMv, Varable Operaonal & Manenance coss ( /MWel) Pcl, Capacy of ech. scheduled o be decommssoned n year (MWel) Pdem Peak-load demand n year (MWel) Pmax Maxmum resource poenal of echnology (MWel) Po, Insalled capacy of echnology n year (MWel) Q, Projeced global nsalled capacy of echnology n year (GW) Top Operaonal lfeme of echnology (Years) b Learnng rae of echnology fav Avalably facor of echnology fcap Capacy facor of echnology n Effcency facor of echnology r Ineres rae Table 1. Nomenclaure 2. Leraure The ssue of he opmum elecrcy generang porfolo has long roubled researchers. Bar- Lev and Kaz [1] were among he frs o nroduce he porfolo analyss n he Power Secor. More recen research [2-4] has exended he analyss o varous power expanson mxes.

4 Mean-varance porfolo echnques have been appled n varous nsances, presenng also varous rsk measures [5,6]. There are wo man approaches n he leraure, when dealng wh energy porfolos and he fuure opmum power generaon mx. The frs approach manly ams a maxmsng he Ne Presen Value (NPV) of he enre sysem nvesgaed, whch s usually he elecrcy generaon secor. The NPV comprses he objecve funcon of an opmsaon problem, whch s subjec o an approprae se of consrans, dependng on he case examned. The opmum pon deermned by he opmsaon problem s he power generaon mx for whch he sysem NPV s maxmsed, hus ndcang he opmum nvesng mng, such as n he works [7-9]. Inevably, hs approach enals forecasng of he fuure elecrcy prces. The second man approach of opmsng energy porfolos concerns works focusng on mnmsng he elecrcy generaon cos [10]. Ths approach has he advanage ha no assumpon over he fuure elecrcy prces has o be made. On he conrary, focusng on mnmum generaon cos mples maxmsng he poenal for posve fnancal yelds, rrespecve of he elecrcy prce. Equvalenly, mnmsng he generaon cos may be consdered as mnmsng he cos o be passed on o he fnal consumers [11]. For example, n [12], medum-range plannng economcs of usng alernave fuel opons for elecrcal-power generaon sysems n Jordan s dscussed, for he perod 2001 o The opons ncluded mpored naural gas, heavy fuel ol, coal and local ol shale, whch were compared usng he levelsed generaon cos mehodology. In a smlar ven, he elecrcy generaon cos n Turkey has been nvesgaed n [13], focusng manly on deermnng scale economes, overcapalsaon, and echnologcal progress for pas years. Indvdual power-plan sraeges have also been he focus of exensve research, such as n [14]. However, examnng only one echnology whou he conex of he whole elecrcy generang secor bears he rsk of gnorng some neresng alernave soluons, poenally leadng o lower generaon cos and prevenng he maxmum benef chances for ndvdual players. Mean-varance frameworks have also been proposed o address he energy porfolo plannng and he opmal allocaon of posons n peak and off-peak forward conracs [15]. I has been shown ha opmal allocaons are based on he rsk premum dfferences per un of day-ahead rsk as a measure of relave coss of hedgng rsk n he day-ahead markes. In a case sudy [16], mulple objecves are confroned n porfolos under demand uncerany n order o lead o opmal expanson soluons. The mul-objecve exenson s acheved by assgnng cos penales o non-cos arbues o force he opmsaon o sasfy non-cos crera, whle sll complyng wh envronmenal and demand consrans. The nfluence of he rsk managemen has been analysed n dfferen sudes concernng eher solely elecrcy producon or mul-objecve funcons comprsng of combned hea and power producon [17,18]. Decson suppor ools have been also developed [19] seekng for globally opmal soluons akng no accoun fnancal and economcal condons and consrans mposed a an nernaonal level. The mpac of unceran energy prces on he supply srucures and her neracon wh he demand secors have been analysed n [20]. 3. Mehodology Ten dfferen elecrcy generaon mehods have been ncluded n he examnaon, almos all of hem wh dfferen fuel source (as seen n Table 3). For each one of hem, he bes avalable echnology has been seleced. The raonale behnd hs choce s ha all avalable convenonal and renewable energy sources should be ncluded n he work, apar from

5 nuclear power, whch s sraegcally excluded from he elecrcy generaon mx of Greece snce many years. The elecrcy generang cos s calculaed for each year and each echnology usng he Levelsed Lfeme Cos Esmaon Mehodology [21]. Accordng o hs mehodology, he levelsed lfeme cos per un of elecrcy generaed s he rao of oal lfeme expenses versus oal expeced oupus, boh expressed n erms of presen value equvalen. The orgnal mehodology has been expanded o mach he specfc requremens of hs work. Thus, he average levelsed lfeme elecrcy generaon cos s EGC, T = [ ( AI, + OMf, n + OMv, n + F, n + CO2, n)(1 + r) ]/ [ E (1 + r) n=, [2010, 2050], where T = mn( + Top, 2050). T n= ] (1) The nvesmen cos s calculaed as a seres of equal annues, spread over he enre lfeme of he specfc echnology, n order o be able o perform relable calculaons also for he years where he operaonal lfeme of a specfc echnology s longer han he remanng me perod for examnaon. Ths way, only he annues correspondng o he me span under nvesgaon are aken no accoun = I, r AI,, [2010, 2050], (1 (1 + r) ) (2) Top where he nvesmen cos I, s calculaed usng he learnng rae, o ake no accoun he learnng effec semmng from he projeced ncrease n global nsalled capacy for each specfc echnology: log [ 1 ] b 2 Q, I, = I, 0, [2010, 2050], (3) Q, 0 where 0 s he reference year (for hs work equal o year 2010). The fuel cos per un of capacy of each echnology s calculaed as E F, = Cf,, [2010, 2050], n Where he energy generaed from a un of capacy of each echnology s E = 8760 fav fcap. (4) (5) The cos of obanng he emsson allowances for he power plans usng convenonal fuel sources s calculaed as CO2, = E Emco2 Cco2 CONV. (6) The Operaonal and Manenance cos (O&M) s dsngushed no varable (OMv - proporonal o he energy generaed) and fxed coss (OMf).

6 3.1 The opmsaon model. The opmsaon problem s formed as a forward-sweepng lnear programmng model. In order o susan lneary, a seres of yearly decsons s modelled. Each yearly decson concerns he capacy of each one of he examned elecrcy generaon echnologes o be added o he curren generaon mx, n order o mee he elecrcy demand ncrease. The objecve funcon of he opmsaon problem s he cos of generang he excess energy requred n he year examned, whch s o be mnmsed. f ( x) = mn EEGC, X s.. Po, P max ( wnd, hydro, geohermal) (8) 130 % Pdem Po, (9) Edem EPo, (10) E Po, 50 % EPo, (11) REN REN X X E Po, 35 % EPo, [2020,2050] (12) CONV (13) REN, (14) where he oal nsalled capacy for each echnology and year s provded by a recursve formula, akng no accoun he new generaon capacy nsalled each year and subracng he old generaon capacy ha has reached s operaonal lfeme durng he year under examnaon: (7) Po, = Po, -1 + X -Pcl,. (15) The frs se of consrans (8) saes he maxmum poenal of some renewable energy sources. In hs work has been assumed ha he maxmum nsalled capacy of wnd, hydro and geohermal power mus be less han he respecve naonal poenal, a all mes. Consrans (9) and (10) refer o he power and energy demand. (9) ensures ha he oal nsalled generang capacy wll be a leas 30% greaer han he peak-load demand, n order o secure unnerruped supply of demand, even n peak-load perods. (10) requres ha he energy produced wll be enough o sasfy energy demand. Consran (11) akes no accoun grd sably ssues. The fac ha mos renewable energy sources canno be dspached when requred, as hey srongly depend on weaher condons, prevens hem from consung a relable base-load soluon n he long erm (manly applcable o wnd parks and phoovolacs, and o some exen for hydro and bomass). Despe her shor seup perods and zero fuel requremens, hey ofen suffer from resource unavalably. Thus, unpredcable condons mgh mpac he sably of he naonal grd and he relably of power supply. Despe he fac ha here s no consensus on he maxmum allowable percenage of renewable energy o secure he grd sably, scenss agree ha here s currenly an upper lm on renewable power peneraon o he grd [22].

7 For hs reason a consran s mposed ensurng ha he oal energy producon from RES may no exceed 50% of he oal energy demand. Consran (12) reflecs he curren naonal renewable energy arges, whch requre ha 35% of he oal elecrcy from year 2020 onwards wll be generaed by renewable energy sources. In order o faclae he model operaon, hs arge has been lnearly shared o he years unl 2020, sarng from a 10% RES share for he year Consrans (13) and (14) are logcal non-negavy consrans for he opmsaon varables. Furhermore, an arbrary upper lm equal o 1500 MW/year for every convenonal power echnology and 1000 MW/year for every RES has been appled, n order o avod he unnaural case where only one power source s used n one year. The CO2 allowance prce uncerany has been aken no accoun n hs work by analysng four scenaros of prce evoluon. The frs one (Scenaro 1) assumes zero fuure prce of allowances, whch corresponds o he suaon before esablshmen of he Kyoo proocol. Ths scenaro s unlkely o be realsed, bu s ncluded for comparson o undersand how would he elecrcy secor nvolve f no measures for emssons reducon were aken. The oher hree scenaros all use as sarng value he prevalng CO2 prce a he end of he year 2009, whch was around 15 /n CO2. Scenaro 2 models a very low ncrease n fuure emsson allowance prces, whereas scenaros 3 and 4 model a medum (2,5% yearly) and hgh (5% yearly) prce ncrease respecvely. Scenaro 1 Zero CO2 prce ( /n CO2) Scenaro 2 Low CO2 prce ( /n CO2) Scenaro 3 Medum CO2 prce ( /n CO2) Scenaro 4 Hgh CO2 prce ( /n CO2) Year ,00 15,00 15, ,17 16,97 19, ,17 19,20 24, ,29 21,72 31, ,45 24,58 39, ,59 27,81 50, ,79 31,46 64, ,90 35,60 82, ,10 40,28 105,60 Table 2. CO2 prce scenaros Varous assumpons had o be made n order o realse he model presened n hs work. Frs of all, has been assumed n hs work ha convenonal-fuel elecrcy generaors wll have o purchase he full amoun of he emsson allowances hey requre for elecrcy generaon, whch means ha here are no free emsson allowances allocaed by he governmen (excep from scenaro 1, where all emsson allowances are consdered o be provded a zero cos). Furhermore, s assumed ha he renewable energy generaors wll no be able o rade he green cerfcaes from he energy hey generae, as he saus s no he same n all counres a he momen, and s no clear wheher wll be possble o do so n he fuure. The poenal ncome from radng emsson allowances or green cerfcaes should be ncluded n

8 he calculaons, hus reducng he respecve generaon cos, n order o be far, n cases where he specfc nsallaons are elgble. Anoher assumpon s ha he nflaon rae has no been ncluded n he analyss, whch means ha all fuure values used are deflaed o real values. The neres rae r has been assumed equal o 8%. I should be noed also ha no publc subsdy has been assumed for he renewable energy sources, as subsdes are polces varyng for each counry and also whn he same counry wh me. Therefore, hs work akes no accoun he real elecrcy generaon cos of all echnologes, wh eher convenonal or renewable fuel sources, as any ype of subsdes are ulmaely passed on o he fnal consumers (drecly or ndrecly) and fnally ncrease he generaon cos. The man npus of he model are presened n Table 3. Hard-coal Ol Naural Gas Lgne Bomass Solar PV Wnd urbnes Hydroelecrc Hydro pumped sorage Geohermal Invesmen cos ( / KW el ) year Fxed cos (O&M, nsurance 56, , ec.) ( /MW el ) Varable cos ( / MWh el ) 3,2 1,6 1, ,5 1,5 18 Avalably facor 0,75 0,85 0,75 0,85 0,85 0,99 0,98 0,98 0,92 0,7 Capacy facor 0,85 0,8 0,85 0,85 0,8 0,15 0,35 0,25 0,4 0,9 Learnng rae 0,01 0,01 0,01 0,01 0,15 0,2 0, Effcency Facor 0,51 0,45 0,54 0,41 0, CO2 emssons (nco2 / MWh el ) 0,656 0,62 0,38 1, Operaonal Lfe- Tme (Years) Table 3. Man npus of he model (Source: [9,21]) 4. Resuls & dscusson The opmsaon problem has been appled for he four fuure CO2 prce scenaros. The opmum values of he opmsaon varables, whch are he capacy of each of he examned elecrcy generaon echnologes o be added o he curren generaon mx for each year of he nvesgaed me-perod, are presened n Fg.1. The resulng generaon capacy mx s calculaed by eq. (15) and s presened n Fg.2. Fnally, he energy (elecrcy) generaon mx s presened n Fg.3.

9 Fgure 1. Yearly capacy addons. Concernng he yearly capacy addons (Fg. 1), nally wnd power s used exclusvely n all scenaros o acheve he RES peneraon arges, unl he year Ths fac ndcaes ha wnd power has he leas generaon cos among all RES for hs me perod. Immedaely afer hs perod, as wnd power poenal s exhaused, emphass s gven on hydro-power. Geohermal power s also engaged n year 2020 for he scenaros 1&2 (wh zero or low CO2 cos), whereas for he scenaros wh hgher CO2 prces, geohermal power s used earler, n year Solar power generally does no seem o be able o compee wh he oher RES n cos erms. I s no used unl he year 2035 for scenaros 1&2, whereas s used even laer n scenaros 3&4 (wh hgh CO2 cos), wh he excepon of year 2014 for scenaros 2,3&4. Bomass s used n very small amouns n scenaros 1&2 (wh zero or low CO2 cos). Ineresngly, n scenaros 3&4 (wh hgh CO2 cos) bomass s used exensvely afer 2020 (for scenaro 3) or 2017 (for scenaro 4), and s even replacng convenonal power sources. As far as he convenonal power sources are concerned, lgne s he only fuel of choce for scenaros wh zero or low CO2 fuure cos. Ths fndng s n accordance wh he pracce before he nroducon of he Kyoo proocol requremens, when lgne was he only baseload fuel used n Greece. Scenaro 3, wh medum CO2 cos favours manly he use of coal as he fuure base-load fuel, apar from a small me perod beween he years when lgne would be used. The scenaro wh hgh CO2 cos leads o he use of only naural gas as he base-load fuel. Therefore, a very neresng fndng s ha he echnology (and fuel) chosen as he fuure base-load acually changes dependng on he esmaed fuure CO2 prce. In each scenaro, praccally only one convenonal fuel echnology s ulsed, gradually

10 phasng ou all oher echnologes nsalled. Hgher CO2 prces promoe envronmenal frendler and more expensve echnologes. I should be noed ha durng he frs en years of he analyss, almos all new capacy added s renewable, n order for he sysem o be able o acheve he arge of 35% RES share n elecrcy generaon. Acually, as can be seen n Fg. 2, RES are even replacng convenonal fuel capacy durng hs frs perod unl he year 2020, meanng ha old convenonal fuel power plans ha are decommssoned are beng replaced by RES. Fgure 2. Generaon capacy mx. I s neresng o noe ha afer he year 2023 o 2025 for scenaros 3&4, renewable energy generaon reaches s upper allowable share of 50% (grd sably consran), whch means ha RES are more cos-effecve han convenonal power sources (Fg.3). As a maer of fac, bomass presens an ncreasng rend n hese scenaros, whch leads o he concluson ha could even be consdered as a base-load echnology alernave o he convenonal power sources, as proves o be more cos-effecve. In conras, scenaros wh zero or low CO2 cos do no favour RES. In hese scenaros RES peneraon s lmed o he mnmum amoun foreseen, whch s 35% afer he year Of course all hese fndngs apply under he assumpon made ha he RES do no receve any knd of nvesmen subsdy, and whou akng no accoun poenal ncomes from radng CO2 allowances or green cerfcaes. In realy, f any of hese assumpons does no hold, RES wll be even more aracve, as her generaon cos may be even lower. In Fg. 3 a paradox may be observed, as he oal energy generaed declnes for he frs 7 years, whle a he same me he oal nsalled generaon capacy ncreases. Ths may be explaned by he replacemen of convenonal energy sources, whch are characersed by hgh capacy facors, wh renewable energy sources, whch have sgnfcanly lower capacy

11 facors and herefore lower amoun of energy generaed by one un of capacy nsalled. The nal decrease of oal energy generaed resuls from he fac ha he nal capacy nsalled, usng he avalably and capacy facors assumed, leads o hgher energy generaed ha he demand. From year 2017 onwards he energy generaed maches he energy demand. Fgure 3. Elecrcy mx. Even whou any knd of nvesmen or elecrcy prce subsdy, here wll be a pon where some RES wll have lower generaon cos han convenonal fuel echnologes, f CO2 prces prove o be hgh and assumng ha he learnng raes wll reman consan for he whole perod examned. Based on numercal resuls of he opmsaon, whch canno be presened due o space lmaon, wnd energy proves o have lower generaon cos han he cheapes convenonal power source n all scenaros wh non-zero CO2 prce. Bomass proves o have lower generaon cos han he cheapes convenonal power source n scenaros 3 and 4, bu only afer several years, when he effec of learnng curves s sronger. Smlarly, geohermal power has lower generaon cos han he cheapes convenonal power source n scenaros 3 and 4, and he same apples o hydroelecrc power plans n scenaro 4. Anoher neresng concluson s ha n order o sasfy he fuure forecased energy demand, he nsalled generaon capacy wll have o be doubled beween he years 2010 and However, hs doublng of nsalled capacy wll lead o only 57% ncrease of he energy generaed, as he RES echnologes nroduced n he generaon mx are largely characersed by low capacy facors. 5. Conclusons Ths work presened a mehodology o asss long-erm nvesmen plannng n he elecrcy producon secor. The model used s based on lnear programmng o defne he fuure

12 naonal elecrcy generaon mx up o he year 2050, based on he noon of mnmsng he elecrcy generaon cos, whle a he same me sasfyng several consrans, such as demand, relably and emssons reducon arges. The calculaon of generaon cos was based on a modfed verson of he Levelsed Lfeme Cos Esmaon Mehodology [21]. Addonally, he learnng raes of he varous echnologes are ncluded n he calculaons. The am of he work s o nvesgae he effec ha varous scenaros for emsson allowance prce evoluon may have on he orders for new elecrcy generaon echnologes and herefore, on he fuure elecrcy generaon mx of Greece. The fac ha he emsson allowance prce has been characersed by sgnfcan flucuaons and varably enhances he mporance of hs work. The dea behnd he opmsaon performed s ha one may denfy he mos promsng fuels and echnologes for each level of emsson allowance prce. Ths nformaon could be equally useful for sae auhores and prvae nvesors. The man fndngs of hs work are ha dependng on he fuure emsson allowance prce, he convenonal fuel echnology wh he lowes generaon cos changes. Low CO2 prces favour lgne, medum prces lead o use of coal, whereas hgh prces render naural gas he mos cos-effcen fuel. Furhermore, low CO2 prces do no favour ncreased use of renewable energy sources, as he generaon cos s almos always hgher han ha of he mos effcen convenonal fuel echnology. On he conrary, medum or hgh CO2 prces render some of he RES more cos-effecve han ha of convenonal fuel echnologes, mmedaely or afer several years me. In hs case, he ssue of deermnng, or fndng ways o ncrease, he echnologcal upper lm of RES peneraon n he elecrcy generaon mx whou compromsng supply qualy and relably, becomes of paramoun mporance. 6. References 1. Bar-Lev D., Kaz S., A porfolo approach o fossl fuel procuremen n he elecrc uly ndusry, Journal of Fnance, 31, Awerbuch S., Berger M., Energy Secury and Dversy n he EU: A Mean- Varance Porfolo Approach. Inernaonal Energy Agency, Pars. 3. Awerbuch S., Porfolo-Based Elecrcy Generaon Plannng: Polcy Implcaons for Renewables and Energy Secury. Mgaon and Adapaon Sraeges for Global Change, 11, Bazlan M., Roques F., Analyc mehods for energy dversy and secury. Applcaons of Mean Varance Porfolo Theory. A rbue o Shmon Awerbuch. Elsever, London. 5. Forn I., Fuss S., Hlouskova J., Khabarov N., Obersener M., Szolgayova J., An Inegraed CVaR and Real Opons Approach o Invesmens n he Energy Secor. Journal of Energy Markes, 1, Roques F.A., Newberry D.M., Nuall W.J., Fuel Mx Dversfcaon Incenves n Lberalzed Elecrcy Markes: A Mean-Varance Porfolo Theory Approach. Energy Economcs, 30, Madlener R., Kumbaroglu G., Edger V., Modellng echnology adopon as an rreversble nvesmen under uncerany: he case of he Turksh elecrcy supply ndusry. Energy Economcs, 27, Xa Y., Zhao Y.D., Saha T.K., Opmal porfolo selecon for generaors n he elecrcy marke. Power and Energy Socey General Meeng - Converson and Delvery of Elecrcal Energy n he 21s Cenury. IEEE, Kumbaroglu G., Madlener R., Demrel M., A real opons evaluaon model for he dffuson prospecs of new renewable power generaon echnologes. Energy Economcs, 30,

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