『Abstract
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
References