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ID: 092750

Optimal investment portfolio in renewable energy: the Spanish case / Muno, Jose Ignacio; Nieta, Agustin A Sanchez de la; Contreras, Javier; Bernal-Agustín, Jose L

Muno, Jose Ignacio	Journal Article
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Publication

2009.

Summary/Abstract

This article presents a model for investing in renewable energies in the framework of the Spanish electricity market in a way that risk is minimised for the investor while returns are maximised. The model outlined here is based on an economic model for calculating cash flows intended to obtain the internal rate of return (IRR) of the different energies being studied: wind, photovoltaic, mini hydro and thermo electrical. The IRRs obtained are considered the returns on investments, while their standard deviations are considered associated risks. In order to minimise risk, a comprehensive portfolio of investments is created that includes all of the available energies by means of a system of linear equations. The solution of the linear system is graphically checked using the efficient frontier method for the different financing options. Several case studies within the Renewable Energies Plan (PER is its Spanish abbreviation) that is in force in Spain in the period 2005-2010 are analysed in order to illustrate the method, as are other case studies using different types of financing, helping us to reach the pertinent conclusions.

Key Words

Return ; Risk Optimisation ; Renewable Energy Portfolio ; Efficient frontier

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ID: 093533

Transmission assets investment timing using net present value c / Garcia, Reinaldo C; Contreras, Javier; Correia, Pedro F; Munoz, Jose I

Contreras, Javier	Journal Article
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Publication

2010.

Summary/Abstract

Improvement and expansion of the transmission grid is still an unresolved issue in the new competitive environment. In current electricity markets, transmission lines have become assets that need financial instruments for investors who wish to ensure steady long-term returns and to withstand short-term market volatility. The timing and the combination of new transmission investments is key to analyze their long-term effects. This paper presents the concept of net present value (NPV) curve to estimate the best investment time for the investor, where the curve is constructed by calculating the NPVs resulting from the investment in successive years. A specific contract model based on financial transmission rights (FTR) is used for the NPV evaluation of transmission assets, and the stochastic properties of all variables related to the investment market structure are considered. The model is applied to the IEEE 24-bus Reliability Test System (RTS) showing the approach capabilities as a decision-aid tool for transmission investors.

Key Words

Transmission Investment ; Financial Transmission Rights ; Net Present Value Curve

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