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ECN publication
The role of wind generation in enhancing Scotland's energy diversity and security
Published by: Publication date:
ECN Policy Studies 10-11-2008
ECN report number: Document type:
ECN-B--08-015 Book
Number of pages: Full text:
12 Download PDF  

Published in: Analytical Methods for Energy Diversity and Security, 141, 152, 978-0-08-056887-4, Elsevier.

The UK Energy White Paper sets targets for decarbonization and the deployment of wind and other renewable electricity generating alternatives. The Scottish Executive is committed to increasing renewable energy shares in order to progress on the White Paper objectives. Fossil fuel independence, reliance on domestic sources and enhanced energy security are additional motivating factors for these objectives. Much to its credit, the Scottish Executive is pushing forward with the adoption of wind and other renewables in spite of the widespread belief that these technologies cost more and that increasing their share of the generating mix must therefore increase overall generating costs. The Executive’s efforts are especially notable since risk and other externalities, as subsequently discussed, tend to drive market participants to overinvest in fossil technologies relative to wind. The idea that a more costly technology in the mix must raise overall generating cost may seem obvious and compelling. Nonetheless, it is fl awed. Energy planning represents an investment decision problem. Investors commonly apply portfolio theory to manage risk and maximize portfolio performance under a variety of unpredictable economic outcomes. This report describes essential portfolio theory ideas and discusses their application to Scotland’s electricity generating mix. The report illustrates how wind and other renewables can benefi t the Scottish generating mix. Effi cient generating portfolios include greater shares of wind, which enhance energy security and also reduce overallgenerating cost. The optimal results indicate that compared to National Grid projected mixes, there exist generating mixes with larger wind shares at equal or lower expected cost and risk.

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