Skip to main content

Managing Risk Using Renewable Energy Technologies

  • Chapter
The Virtual Utility

Part of the book series: Topics in Regulatory Economics and Policy Series ((TREP,volume 26))

  • 164 Accesses

  • 10 Citations

Abstract

This paper investigates the potential of owning renewable energy technologies to mitigate risk faced by the electric utility industry. It considers the effect of market structure on the plant ownership decision and how the attributes of renewable energy technologies can help to manage risk. Explicit consideration is given to the renewable energy technology’s attributes of fuel costs, environmental costs, modularity, lead time, location flexibility, availability, initial capital costs, and investment reversibility. It concludes that renewable energy technologies, particularly the modular technologies such as photovoltaics and wind, have the potential to provide decision makers with physical risk-management investments.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Similar content being viewed by others

References

  • Awerbuch, Shimon, 1995. “Market-based IRP: It’s Easy!!!” The Electricity Journal 8(3): 50–67.

    Article  Google Scholar 

  • Brathwaite, Leon, and J. Gopal, 1992. “Fuel Diversity Analysis,” Analysis prepared for the 1992 Electricity Report in California, California Energy Commission.

    Google Scholar 

  • Cadogan, John B., et. al., 1992. “The Risks of Conventional Utility Supply Sources and the Rewards of Renewable Energy,” Windpower 1992, Seattle, WA, 101–111.

    Google Scholar 

  • Cater, James C, 1995. “Valuing Options for Electric Power Resources,” The Electricity Journal 8(3): 43–49.

    Article  Google Scholar 

  • Dixit, Avinash K., and Robert S. Pindyck, 1994. Investment Under Uncertainty, Princeton, New Jersey: Princeton University Press.

    Google Scholar 

  • Duffle, Darrell, 1992. Dynamic Asset Pricing Theory, Princeton, New Jersey: Princeton University Press.

    Google Scholar 

  • Hamrin, Jan, and Nancy Rader, 1994. Affected with the Public Interest: Electric Utility Restructuring in an Era of Competition, National Association of Regulatory Utility Commissioners.

    Google Scholar 

  • Hoff, Thomas E., Howard J., Wenger, and Brian K. Farmer, 1996. “Distributed Generation: An Alternative to Electric Utility Investments in System Capacity,” Energy Policy, vol. 24 No. 2, pp. 137–147.

    Article  Google Scholar 

  • Hoff, Thomas E., 1997. Integrating Renewable Energy Technologies in the Electric Utility Industry: A Risk Management Approach, forthcoming from National Renewable Energy Laboratory.

    Book  Google Scholar 

  • Hyman, Leonard S., 1994. America’s Electric Utilities: Past, Present and Future, 5 edition, Arlington Virginia: Public Utilities Reports, Inc.

    Google Scholar 

  • Jacobs, Jonathan M., and Thomas E. Huntley, 1992. “Valuation of Fuel Diversity,” Testimony in California Energy Commission 1992 Electricity Report Proceeding, Docket No. 90-ER-92.

    Google Scholar 

  • Jones, Scott T., and Frank A. Felder, 1994. “Using Derivatives in Real Decisionmaking,” Public Utilities Fortnightly 132(19): 18–21, 25.

    Google Scholar 

  • Kenetech, 1993 and 1994. Annual Report.

    Google Scholar 

  • Kolbe, Lawrence, and William B. Tye, 1995. “The Cost of Capital Does Not Compensate for Stranded-Cost Risk,” Public Utilities Fortnightly 133(10): 26–28.

    Google Scholar 

  • Lively, Mark B., 1994. “Electric Transmission Pricing: Are Long-Term Contracts Really Futures Contracts?,” Public Utilities Fortnightly 132(19): 29–32.

    Google Scholar 

  • Logan, Douglas M., et. al., 1995. “Integrated Resource Planning with Renewable Resources,” The Electricity Journal 8(3): 56–66.

    Article  Google Scholar 

  • Morris, Peter A, et. al., 1993. “Value of Flexibility and Modularity of Distributed Generation Technologies: Photovoltaics at PG&E’s Kerman Substation—EPRI Investment Strategies Project,” EPRI Report (September).

    Google Scholar 

  • Niagara Mohawk Power Corporation, 1994. Annual Report.

    Google Scholar 

  • Orans, Ren, et. al., 1992. Targeting DSM for Transmission and Distribution Benefits: A Case Study of PG&E’s Delta District. Research Report TR-100487, Palo Alto, California: Electric Power Research Institute.

    Google Scholar 

  • Pacific Gas and Electric Company, 1989 through 1994. Annual Report.

    Google Scholar 

  • Price, Snuller, Bill Clauhs, and John Bustard, 1995. “Profitability and Risk Assessment of T&D Capital Expansion Plans,” Distributed Resources 1995: EPRI’s First Annual Distributed Resources Conference, Kansas City, Missouri (August).

    Google Scholar 

  • Real Goods, 1993. Catalog (Summer).

    Google Scholar 

  • Ross, Sheldon, 1988. A First Course in Probability, 3edition, New York: Macmillan Publishing Company.

    Google Scholar 

  • Southern California Edison, Annual Report (1994).

    Google Scholar 

  • Swezey, Blair G., and Yih-huei Wan, 1995. “The True Cost of Renewables,” Solar Today 9(6): 30–32.

    Google Scholar 

  • Weinberg, Carl J., Joseph J. Iannucci, and Melissa M. Reading, 1991. “The Distributed Utility: Technology, Customer, and Public Policy Changes Shaping the Electrical Utility of Tomorrow.” Energy Systems and Policy 15(4): 307–322.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Editor information

Editors and Affiliations

Rights and permissions

Reprints and permissions

Copyright information

© 1997 Springer Science+Business Media New York

About this chapter

Cite this chapter

Hoff, T.E., Herig, C. (1997). Managing Risk Using Renewable Energy Technologies. In: Awerbuch, S., Preston, A. (eds) The Virtual Utility. Topics in Regulatory Economics and Policy Series, vol 26. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-6167-5_9

Download citation

  • DOI: https://doi.org/10.1007/978-1-4615-6167-5_9

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-1-4613-7827-3

  • Online ISBN: 978-1-4615-6167-5

  • eBook Packages: Springer Book Archive

Keywords

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Publish with us

Policies and ethics