Skip to Main content Skip to Navigation
Journal articles

Risk aversion and technology mix in an electricity market

Guy Meunier 1, * 
Abstract : This article analyzes the effect of risk and risk-aversion on the long-term equilibrium technology mix in an electricity market. It develops a model where firms can invest in baseload plants with a fixed variable cost and peak plants with a random variable cost, and demand for electricity varies over time but is perfectly predictable. At equilibrium the electricity price is partly determined by the random variable cost and the returns from the two kinds of plants are negatively correlated. When the variable cost of the peak technology is high the return of peak plants is low but the return to baseload plants is high. Risk-averse firms reduce the capacity of the riskiest technology and develop the capacity of the other, compared to risk-neutral firms. In the particular case where a risk-neutral firm invests heavily in baseload technology and only sparely in peak capacity, a risk-averse firm would invest less in baseload, increase peak capacity, and increase total installed capacity.
Document type :
Journal articles
Complete list of metadata
Contributor : Migration ProdInra Connect in order to contact the contributor
Submitted on : Friday, May 29, 2020 - 5:05:31 AM
Last modification on : Wednesday, January 26, 2022 - 9:21:02 AM

Links full text




Guy Meunier. Risk aversion and technology mix in an electricity market. Energy Economics, Elsevier, 2013, 40, pp.866-874. ⟨10.1016/j.eneco.2013.10.010⟩. ⟨hal-02646565⟩



Record views