Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-54336
Krey, Boris; Widmer, Philippe K; Zweifel, Peter (2011). Efficient Provision of Electricity for the United States and Switzerland. Working paper series / Socioeconomic Institute No. 0812, University of Zurich.
This study applies financial portfolio theory to determine efficient frontiers in the provision of electricity for the United States and Switzerland. Expected returns are defined by the rate of productivity increase of power generation (adjusted for external costs), volatility, by its standard deviation. Since unobserved productivity shocks are found to be correlated, Seemingly Unrelated Regression Estimation (SURE) is used to filter out the systematic component of the covariance matrix of the productivity changes. Results suggest that as of 2003, the feasible maximum expected return (MER) electricity portfolio for the United States contains more Coal, Nuclear, and Wind than actual but markedly less Gas and Oil. The minimum variance (MV) portfolio contains markedly more Oil, again more Coal, Nuclear, and Wind but almost no Gas. Regardless of the choice between MER and MV, U.S. utilities are found to lie substantially inside the efficient frontier. This is even more true of their Swiss counterparts, likely due to continuing regulation of electricity markets.
|Item Type:||Working Paper|
|Communities & Collections:||03 Faculty of Economics > Department of Economics
Working Paper Series > Socioeconomic Institute (former)
|JEL Classification:||C32, G11, Q49|
|Uncontrolled Keywords:||Efficiency frontier, energy, electricity, portfolio theory, Seemingly Unrelated Regression Estimation (SURE)|
|Deposited On:||04 Jan 2012 16:13|
|Last Modified:||17 Oct 2012 11:22|
|Series Name:||Working paper series / Socioeconomic Institute|
|Number of Pages:||40|
|Additional Information:||Revised version|
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