Skea,J.(2010): Valuing diversity in energy supply. Energy Policy, 38, 3608-3621.


 There is renewed interest in the role of supply diversity in promoting energy security. This paper explores ways of valuing diversity. A possible incentive mechanism for promoting diversity which takes account of underlying “disparities” between different technology options is developed. The mechanism provides a way of trading off cost and diversity and results in an “efficient” cost-diversity frontier by analogy with financial portfolio theory. If all technologies are believed to be equally disparate, the appropriate mechanism is a “levy” imposed on market share. If the technologies are not equally disparate, the levy needs to be adjusted by technology-specific multipliers that take account of levels of disparity and patterns of market share. The analysis is applied to two stylised situations. In the long-run equilibrium case, the implications of both different patterns of disparity and different values attached to diversity are investigated. The paper also explores the implications of applying such a mechanism to the current Great Britain electricity system. The implications in terms of financial flows, for both the market as a whole and for individual operators, are investigated. Finally, the appropriateness of such a mechanism in the light of other policy goals, and possible future research directions, is discussed.

Keywords: Security of supply; Diversity of supply; Electricity generation』

1. Introduction
2. Diversity indicators
 2.1. Overview
 2.2. The notion of disparity
 2.3. Diversity indicators
3. Trading off cost and diversity
 3.1. Overview
 3.2. Fully disparate technologies
4. The general case: Different degrees of disparity
5. Diverse electricity systems from a long-run perspective
6. Impacts on a non-equilibrium system
 6.1. Overview
 6.2. A market mechanism to promote diversity
 6.3. Revenue impacts of a portfolio levy under Case 4
 6.4. Great Britain electricity system case study
7. Conclusions and further research
Appendix A. Supporting information