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Dissertation/Thesis Abstract

Technology portfolio and capacity expansion under uncertainty
by Filomena, Tiago Pascoal, Ph.D., The George Washington University, 2010, 116; 3427011
Abstract (Summary)

We analyze the problem of generation capacity expansion and portfolio of technologies choice in a restructured electricity market in which marginal costs are uncertain. In our investment model, firms behave as Cournot players and they make three different decisions in equilibrium: (i) the portfolio of technologies, (ii) technologies capacity and (iii) technologies production for every scenario. The decisions related to the portfolio and capacity are ex-ante and the production is ex-post to the realization of uncertainty. We consider the marginal cost as the uncertain parameter and we show with a simple transformation that the model is also flexible to allow for general load curves. Our main result is that portfolio diversification arises even with risk-neutral firms and technologies with different cost expectations. Furthermore, we characterize the production level of each firm for each possible scenario realization. All the conditions that yield (or do not yield) to diversification in a duopoly with two scenarios are discussed in the dissertation. Under our assumptions, we point out that in aggregate terms firms always invest and produce the same quantities. Asymmetry on the use of technologies between players can occur, but it just happens when technologies have the same cost expectation. We show that when technologies present different cost expectation the equilibrium results are unique and symmetric.

Indexing (document details)
Advisor: Campos-Nanez, Enrique
Commitee: Abeledo, Hernan G., Duffey, Michael R., Garcia, Alfredo, Santos, Joost R.
School: The George Washington University
Department: Engineering Mgt and Systems Engineering
School Location: United States -- District of Columbia
Source: DAI-B 71/12, Dissertation Abstracts International
Subjects: Systems science, Energy, Operations research
Keywords: Capacity expansion, Cost, Electricity markets, Game theory, Investments, Uncertainty
Publication Number: 3427011
ISBN: 978-1-124-29676-0
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