Current Research

2006

A Brief Overview of Wind Economics in the 21st Century

Predictions are risky, but I begin this note by making one: over the next 15 years, electricity from wind turbines installed today will cost less than gas generation, which many believe to be the current least-cost alternative. I base this prognostication on my own risk-adjusted cost estimates, which use finance-oriented procedures that rely on the Capital Asset Pricing Model (CAPM).
Complete version (Word doc)

Wind Provides Competitive Advantage for Scotland

This study uses portfolio theory to demonstrate that increasing the share of wind reduces Scotland’s expected electricity costs. Such an outcome is consistent with modern portfolio theory, widely used by investors to manage risk and maximise asset performance under a variety of unpredictable economic conditions.

Wind and other renewables offer an effective mechanism for climate change mitigation along with enhanced energy supply security. Yet policy makers are concerned that increasing their deployment will raise electricity-generating costs. Although the idea that adding a potentially more costly technology such as off-shore wind to the generation mix will raise overall generating cost may seem obvious and compelling, it does not hold. Wind helps diversify the generating mix and improve its cost-risk performance the way diversification improves the expected performance of a financial portfolio.
Airtricity Report - Complete version (PDF file)
Presentation slides (PDF file)

2005

Output Variability as an Issue Surrounding the Integration of Wind

Wind integration issues have fostered considerable debate recently with the dialogue increasingly focused on the variability or ‘intermittency’ of wind output. This Briefing Paper explores wind variability as it affects conventionally structured electricity systems and markets, although the last section outlines a proposed set of network protocols that allow a discrete load-matching of wind output to appropriate ‘dispatchable’ applications in a manner that does not burden the overall system with additional reserve or balancing requirements.
Briefing paper (Word doc)

Submitted to: Environmental Audit Committee, House of Commons
New Enquiry: Keeping the Lights on: Nuclear,
Renewables and Climate Change

In this submission I argue two principal points. First, that while electricity planning has long relied on the stand-alone generating costs of various technologies, this measure is no longer relevant.

Second, I argue that the current debate about the system integration costs of wind and other variable output renewables is largely misplaced.
Commons testimony (Word doc)

'The Cost of Geothermal Energy in the Western US Region: A Portfolio-Based Approach.' Prepared for: Sandia National Labs: March
A Portfolio Based Analysis (Word doc)

Exploiting the Oil-GDP Effect to Support Renewables Deployment
SPRU Electronic Working Paper No. 129

A growing body of academic literature suggests that oil price volatility dampens economic growth by raising inflation and unemployment. Surprisingly, this issue seems to have received little attention from energy policy makers.

In percentage terms, the Oil-GDP effect is relatively small. In absolute terms however, even a 10% oil price rise- and oil has risen at least 50% in the last year alone- produces GDP losses that, could they have been averted, would significantly offset the cost of increased RE deployment.

We show that each kW of renewables avoids $250-$450 in GDP losses and that a 10% increase in renewables electricity would offset 25%-50% of the total EREC/G-8 renewables investment needs. The societal valuation of non-fossil alternatives needs to reflect avoided GDP losses, whose benefit is not fully captured by private investors.
Oil-GDP Effect paper (PDF file)

2004

'Towards A Finance-Oriented Valuation of Conventional and Renewable Energy Sources in Ireland.' Prepared for: Sustainable Energy Ireland Perspective from Abroad Series, Dublin: June
Sustainable Energy (Word doc)

REEEP/UNEP project that applies portfolio-theory to demonstrate that adding wind/geothermal reduces overall generating cost in developing nations. Other participants: ECN (Netherlands), TERI (India), IIE (Mexico), CDER (Morocco).
Reeep (Website link)
Final Portfolio Planning Report (Word doc)

'Restructuring Our Electricity Networks to Promote Decarbonization: Decentralization, Mass-Customization and Intermittent Renewables in the 21st Century,' Tyndall Centre Working Paper No. 49, March;
Tyndall Centre Working Paper (PDF file)

2003

Portfolio-based Generation Planning: Implications for Renewables and Energy Security, REEEP, British Foreign and Commonwealth Office, London, and United Nations Environment Programme, Paris, September
Portfolio-Based Gen. Plan (PDF file)

Energy Security in the EU: Applying Portfolio Theory To EU Electricity Planning And Policy-Making, (with M. Berger,) Paris: International Energy Agency, February; Report No. EET/2003/03.

Applying Portfolio Theory to EU Electricity Planning and Policy Making: This study introduces mean-variance portfolio theory and evaluates its potential application to the development of efficient (optimal) European Union (EU-15) generating portfolios that enhance energy security and diversification objectives.
IEA/EET Working Paper (PDF file)

2002

Oil price Volatility and Economic Activity: A Survey and Literature Review (With Raphael Sauter), Research Paper, Paris: IEA, September.
Oil Price Volatility Paper (Word doc)

2000

'Investing in Renewables: Risk Accounting and the Value of New Technology,' US-DOE, Million Solar Roofs Program, January 17
Investing in Renewables Risk Accounting and the Value of New Technology (PDF file)