The optimization of energy portfolio management (EPM): Framework and simulation

Chang, Yan
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Southern New Hampshire University
With the rapid increasing energy needs from all kinds of energy consumers, energy prices have increased dramatically, especially the price for fossil energy. How to lower energy consumption cost, which energy is optimal choice, and how social costs of energy will impact on energy consumption, these questions are addressed in this dissertation via Energy Portfolio Management (EPM) model with framework and simulation. The EPM model is established to find out an optimal energy solution which can provide useful guidance to energy consumers and policymakers about how to select optimal energy portfolio with lower cost and less risk. The conceptual framework presents the methodology of EPM, while EPM simulations demonstrate the selection of optimal energy choices, and further, the impacts of social cost on the optimal energy portfolio in the case of United States. The findings from EPM Simulations fall into three categories: 1)without considering social cost, biomass and coal are optimal choices and should consume at the maximum; 2)considering single social cost, coal and nuclear are favored only if social cost of coal is less than 100% of its private cost or social cost of nuclear is less than 300% of its private cost, otherwise, biomass is optimal; 3)considering all sorts of social costs simultaneously, optimal energy portfolio varies with the level of social cost: with low and central level of social cost, coal and nuclear are preferable due to their stable and lower cost; with high level of social cost, biomass, nuclear and potential natural gas are still favored, however the optimal solution will switch to favor biomass (if social cost of coal is more than 300% of its private cost or social cost of nuclear is 830% more than its private cost.