Modeling optimal investments with portfolio analysis in electricity markets

"Analyses of renewable energy technologies usually focus on static accounting of energy and greenhouse gases balances. The actual energy generation portfolios are based on fossil fuel determining an increased exposure to fluctuations prices, particularly for countries heavily depending on imported energy. In this paper, a model is presented to simulate the evolution of the renewable energy balance. It applies portfolio theory in the Italian electricity market for different energies sources: biomass, wind, hydro and photovoltaic. The aim of this paper is to demonstrate the relevance of making a portfolio risk explicit, and, through an optimal generation portfolio, show as such risk can be mitigated by the diversification of investments in renewable energies. Moreover the presented analysis can be useful for energy planners to select future green scenarios finalized to the reduction of energy imports through the increasing use of renewable energy. "