Climate policy uncertainty and power generation investments: A real options-CVaR portfolio optimization approach

A decision support framework has been provided to assist investors with long-term decision-making for investment choices in power generation assets under uncertain climate policy. The model combines real options analysis and modern portfolio optimization theory. A long-term correlation between carbon and renewable portfolio standard certificate prices is used to model the interaction of climate policies, with a case study being developed to investigate the optimal choice of capacity additions to an existing mix of power generation assets in Australia. The findings show that there is potential for investors to fully hedge their existing fossil fuel based generation assets through the addition of on-shore wind capacity. The model developed allows for (1) the investigation of investment risk and return under uncertain climate policies, and (2) the study of interaction among green policies

Improved voltage control of the electric vehicle operating as UPS in smart homes

As a contribution for sustainability, electric vehicles (EVs) are seen as one of the most effective influences in the transport sector. As complement to the challenges that entails the EVs integration into the grid considering the bidirectional operation (grid-to-vehicle and vehicle-to-grid), there are new concepts associated with the EV operation integrating various benefits for smart homes. In this sense, this paper proposes an improved voltage control of the EV operating as uninterruptible power supply (UPS) in smart homes. With the EV plugged-in into the smart home, it can act as an off-line UPS protecting the electrical appliances from power grid outages. Throughout the paper, the foremost advantages of the proposed voltage control strategy are comprehensively emphasized, establishing a comparison with the classical approach. Aiming to offer a sinusoidal voltage for linear and nonlinear electrical appliances, a pulse-width modulation with a multi-loop control scheme is used. A Kalman filter is used for decreasing significantly the time of detecting power outages and, consequently, the transition for the UPS mode. The experimental validation was executed with a bidirectional charger containing a double stage power conversion (an ac-dc interfacing the grid-side and a dc-dc interfacing the batteries- side) and a digital stage. The computer simulations and the acquired experimental results validate the proposed strategy in different conditions of operation.This work has been supported by COMPETE: POCI-01-0145-FEDER-007043 and FCT – Fundação para a Ciência e Tecnologia within the Project Scope: UID/CEC/00319/2013. This work is financed by the ERDF – European Regional Development Fund through the Operational Programme for Competitiveness and Internationalisation – COMPETE 2020 Programme, and by National Funds through the Portuguese funding agency, FCT – Fundação para a Ciência e a Tecnologia, within project SAICTPAC/0004/2015 – POCI – 01–0145–FEDER–016434. This work is part of the FCT project 0302836 NORTE-01-0145-FEDER-030283.info:eu-repo/semantics/publishedVersio

Analysing future change in the EU's energy innovation system

We develop a novel approach for quantitatively analysing future storylines of change by combining econometric analysis and Monte Carlo simulation for four different storylines of change in the EU's energy innovation system. We explore impacts on three key innovation outcomes: patenting (innovation), co-invention (collaboration), and technology cost reduction (diffusion). We find that diverse mixes of policy instruments stimulate collaborative innovation activity. We find that both RD&D expenditure and trade imports support knowledge generation and exchange, and that these relationships are largely robust to future uncertainty. Conversely, we find that policy durability and stability are only weakly linked to innovation outcomes, suggesting that adaptive policy responding to rapidly changing innovation environments should play an important part of the EU's energy future

Accelerating the Energy Transition through Power Purchase Agreement Design: A Philippines Off-Grid Case Study

As renewable energy (RE) costs decrease, private non-subsidized revenue sources, such as power purchase agreements (PPA), will increase in off-grid areas. This paper’s objective is to improve policymakers’ and utilities’ understanding of PPA’s role in mitigating private investors’ risks in off-grid areas to accelerate the energy transition. The paper built a PPA dataset for the largest off-grid area in the Philippines and developed novel and efficient techniques to evaluate the risk mitigation ability of a PPA. While oil-based technologies are expensive, they are low-capital-intensive, and the fuel, the bulk of the cost, is passed through to consumers and primarily funded by subsidies. In contrast, the most affordable energy source, RE, requires higher upfront capital investments, financed primarily with equity. Investors chose low-capital-intensive technologies (oil), rehabilitated power plants, and utilized old equipment, all investment decisions to mitigate residual PPA risks, i.e., distribution utilities’ low creditworthiness and capital recovery uncertainty. Presenting the investment as a PPA residual mitigation tool is one of the paper’s contributions to the literature. The distribution utility needs to reduce investors’ uncertainty by covering reasonable investors’ costs. Policymakers need to level the playing field between fossil fuels and RE by reducing subsidies and strengthening distribution utility creditworthiness

Portfolio-based decision-support tool for generation investment and planning in uncertain and low-carbon future electricity industries

Growing concerns over high and volatile fossil-fuel prices, energy security and climate change present significant sustainability challenges for electricity industries around the world. They have particular implications for generation investment and planning as decisions to build power plants represent major commitments with regard to future electricity industry costs, fuel dependencies, energy security outcomes, and greenhouse emissions. Increasing uncertainty about future fuel prices, plant construction costs, climate change policies and electricity demand adds to the challenges. In consequence, generation investment decision-making is transitioning from traditional cost minimisation approaches towards more complex assessments incorporating future uncertainties and a range of industry objectives.This thesis presents a novel generation investment and planning decision-support tool for assessing possible future generation portfolios within an electricity industry under uncertainty and multiple policy objectives. The tool extends conventional optimal generation mix concepts by using Monte Carlo simulation and portfolio analysis techniques to determine probability distributions of future expected generation costs and greenhouse emissions for a wide range of generation portfolios. The tool can incorporate complex and correlated probability distributions for future fossil-fuel prices, carbon prices, plant investment costs, and electricity demand including price elasticity impacts. It supports sophisticated risk assessments, including downside economic risks, for any generation portfolio. A post-processing analysis is also implemented to assess the potential operational dispatch constraints and costs associated with different portfolios in meeting time-varying demand.Applications of this tool are demonstrated through case studies of electricity industries with different generation options facing a range of future uncertainties. The results provide high-level insights into issues that will likely be key drivers of future industry performance such as the impact of different sources of uncertainty, the role of future demand changes in response to electricity prices, and the interaction between wind penetration and carbon pricing on the expected costs, cost risks, and emissions of different portfolios. The implications of nuclear power and the value of different technologies within generation portfolios are also explored. These results highlight the potential value of the tool in facilitating utility and policy decision-making in the challenging task of generation investment and planning for increasingly uncertain future electricity industries

Evaluation of potential co-benefits of air pollution control and climate mitigation policies for China's electricity sector

Since the rapid industrialisation, local air pollution has become one of China's most important environmental issues. In consequence, increasingly stringent air pollution control policies have been established by the Chinese government. These policies will inevitably affect China's future electric power investment given the key contribution of this sector to air pollution. This sector is also a key contributor to China’s greenhouse gas emissions and hence climate policy efforts. We present a study exploring what impacts of potential interactions and combinations of different policy efforts for local air pollutant control and carbon mitigation have on China's future electricity generation mix. The study utilises a novel generation portfolio model that explicitly incorporates key uncertainties in future technology costs and different policy approaches including carbon pricing and air emissions control. The findings highlight that China can achieve significant reductions for both greenhouse gas and local air pollutant emissions through a combination of climate change and air pollution control policies. Furthermore, there are potentially significant co-benefits from the perspectives of both air pollutant control and carbon mitigation and, notably, that the co-benefit from a sufficient carbon pricing policy to air pollution emission reductions is much stronger than that from stringent air pollutant control policies to carbon mitigation. Specifically, in order to achieve substantial local air pollution and greenhouse gas mitigation from China's electricity sector, it is necessary to close coal-fired power plants rather than merely seeking to clean their air pollution emissions up