Fuel Cost Uncertainty Research Articles

Airline industry equities under external uncertainty shocks

We gauge the impact of news and other relevant external uncertainties facing airline firms via an equity market lens. Using local projections, we establish that rising investors’ fear shocks have long-lasting negative effects on airline industry equity returns, while increasing geopolitical, climate policy, and fuel cost uncertainties have comparatively short-lived impacts. Our results are robust to several alternative model specifications, including a pre-pandemic subsample. Based on our findings, we provide a promising avenue for future research in airline financial management.

Multi-objective stochastic programming energy management for integrated INVELOX turbines in microgrids: A new type of turbines

In this paper, a new type of wind turbine that is called INVELOX has been used. INVELOX has many advantages such as six times more power generation than previous types, work at low speed, inconsiderable maintenance and investment costs, and reduce the environmental effects of previous wind turbines. Moreover, other renewable and nonrenewable generators are used in the energy management and scheduling of the microgrid. The test case is a microgrid with selling and buying energy capability in which the cost and pollution are considered as the objective functions. In the following, Uncertainties of wind speed, solar radiation and electrical-thermal loads are investigated and a multi-objective stochastic mixed integer linear programming is solved in the first scenario. Then, in the second scenario, the effects of fuel cost uncertainty on generation units and objective functions have been studied. The Epsilon constraints method and fuzzy satisfying are utilized to solve the problem and choose the best solution, respectively. By using of INVELOX turbines, total cost and pollution of the microgrid in both deterministic and stochastic planning are reduced from 192.68 $ to 97.23 $ and 249.28 $ to 126.38 $, as well 3334.76 Kg to 3302.7 and 3925.63 to 3910.2 Kg respectively.

Investment in electricity capacity under fuel cost uncertainty: Dual-fuel and a mix of single-fuel technologies

We study the effect of the price and price volatility of natural gas on investment in electricity capacity in two technology scenarios: (1) dual-fuel units that use natural gas and diesel; and (2) a mix of single-fuel plants that use coal or natural gas. We develop a two-stage (capacity and operation) model and derive analytical solutions for both scenarios. Based on the observed log-normal distribution of the natural gas price, we show that optimal capacity investment increases moderately with natural gas price volatility, countering a commonly held view that fuel cost uncertainty tends to discourage capacity investment. Thus, higher volatility of the natural gas price tends to reduce the 'missing money' problem. We use Texas data to show that higher gas price volatility implies higher profits and consumer surplus in the first scenario, even when the per MWh diesel cost is much higher than the expected value of the per MWh gas cost. In the second scenario, firms invest only in gas capacity, unless the per MWh coal cost is significantly below the expected per MWh gas cost, thus explaining the popularity of gas generation.

Fuel cost uncertainty, capacity investment and price in a competitive electricity market

This paper studies the effect of natural-gas fuel cost uncertainty on capacity investment and price in a competitive electricity market. Our model has a two-stage decision process. In the first stage, an independent power producer (IPP) builds its optimal capacity, conditional on its perceived uncertainties in fuel cost and electricity demand. In the second stage, equilibrium prices and quantities are determined by IPPs competing in a Cournot market. Under the empirically reasonable assumption that per MWh fuel costs are log-normally distributed, we find that a profit-maximizing IPP increases its capacity in response to rising fuel cost volatility. Consequently, the expected profit of the IPP and expected consumer surplus increase with volatility, rejecting the hypothesis that rising fuel cost uncertainty tends to adversely affect producers and consumers. Expected consumer surplus further increases if the IPP hedges the fuel cost risk. However, the IPP's optimal strategy is not to do so. The policy implication of these results is that the government should not intervene to reduce the price volatility of a well-functioning spot market for natural gas, chiefly because such intervention can have the unintended consequence of discouraging generation investment, raising electricity prices, and harming consumers.

수도권 운행차 대기오염 저감사업의 효과: 실물옵션분석

수도권 미세먼지 발생저감 대책의 일환으로, 노후화된 경유차에서 발생하는 주요 대기오염물질 배출을 저감하기 위한 수도권 운행경유차 공해저감 사업이 시행되었다. 본 사업의 사회적 경제성을 평가하기 위한 방법론을 제시하고, 주요 차량 배출저감장치의 유효성을 비교 분석하였다. 방법론적으로는 노후화된 차량의 차령이 유한하기 때문에, 본 사업의 평가에 적합하도록 만기유한 형태의 실물옵션 모형을 개발하였다. 분석 결과, 공해저감 사업의 사회적 경제성은 전반적으로 확보되며, 버스와 트럭별로 저감장치를 구분하여 선택적으로 이루어질 때 그 효과가 더욱 제고되는 것으로 나타났다. This paper attempts to evaluate an environmental regulation program which enforces installation of filtering equipment to reduce major air pollutants from used diesel vehicles. A real option model is presented to incorporate fuel cost uncertainty and irreversibility of emission-reducing investment. A finite-life option based on finite difference method is developed to consider the limited life expectancy of used vehicles. After taking into account social benefits from emission reduction and costs from decreasing fuel efficiency after the adoption of filtering technology, the result finds overall positive performance of the Pollution Reduction Program. However, the result suggests that the Program be designed to be more specific to vehicle types to improve program performance.

Cournot Equilibrium Considering Unit Outages and Fuel Cost Uncertainty

The Cournot model is a common and reasonable approximation to representing strategic competition in electricity markets. This paper proposes a Nash-Cournot model in which unit outages and fuel cost volatility are both accounted for. The Nash equilibrium quantity of each firm is obtained by maximizing its expected profit given the distribution of fuel costs and the availability of generating units. The Cournot equilibrium problem is formulated as a linear complementarity problem. We give a numerical example to show how the price, equilibrium quantities, and firms' profits are affected when outages and fuel cost volatility are ignored.

Optimal Allocation of ESS in Distribution Systems With a High Penetration of Wind Energy

Environmental concerns and fuel cost uncertainties associated with the use of conventional energy sources have resulted in rapid growth in the amount of wind energy connected to distribution grids. However, based on Ontario's standard offer program (SOP), the utility has the right to curtail (spill) wind energy in order to avoid any violation of the system constraints. This means that any increase in wind energy production over a specific limit might be met with an increase in the wind energy curtailed. In spite of their cost, energy storage systems (ESSs) are considered to be a viable solution to this problem. This paper proposes a methodology for allocating an ESS in a distribution system with a high penetration of wind energy. The ultimate goal is to maximize the benefits for both the DG owner and the utility by sizing the ESS to accommodate all amounts of spilled wind energy and by then allocating it within the system in order to minimize the annual cost of the electricity. In addition, a cost/benefit analysis has been conducted in order to verify the feasibility of installing an ESS from the perspective of both the utility and the DG owner.

The Role of Nuclear Power in Reducing Risk of the Fossil Fuel Prices and Diversity of Electricity Generation in Tunisia: A Portfolio Approach

This paper applies real options and mean–variance portfolio theories to analyze the electricity generation planning into presence of nuclear power plant for the Tunisian case. First, we analyze the choice between fossil fuel and nuclear production. A dynamic model is presented to illustrate the impact of fossil fuel cost uncertainty on the optimal timing to switch from gas to nuclear. Next, we use the portfolio theory to manage risk of the electricity generation portfolio and to determine the optimal fuel mix with the nuclear alternative. Based on portfolio theory, the results show that there is other optimal mix than the mix fixed for the Tunisian mix for the horizon 2010–2020, with lower cost for the same risk degree. In the presence of nuclear technology, we found that the optimal generating portfolio must include 13% of nuclear power technology share.

Cost-Effective Wind Energy Utilization for Reliable Power Supply

Environmental concerns and fuel cost uncertainties associated with the use of conventional energy sources have resulted in rapid growth of wind energy applications in power generating systems. It is important to assess the actual cost and benefit of utilizing wind energy in a power system. Such assessments require realistic cost/reliability evaluation methods and quantitative indices. This paper presents a simulation technique that generates probabilistic indices that can help determine appropriate wind power penetration in an existing power system from both the reliability and economic aspects.

Informing decision makers and identifying niche opportunities for windpower: Use of multiattribute trade off analysis to evaluate non-dispatchable resources

The operational and flexibility characteristics of renewable energy technologies are often overlooked in traditional head to head technology comparisons. This impedes their adoption since identification of environmental and risk mitigation advantages requires evaluation of such non-dispatchable technologies in a systemwide context. Use of multiattribute resource planning tools in a trade off analysis framework identifies the complementary emissions reduction and fuel diversification characteristics of renewables. Data visualization using trade off analysis communicates electric resource interactions and the risks of following various strategies to diverse stakeholder audiences, promoting acceptance. This paper provides an overview of the multiattribute trade off approach and applies it to resource strategies incorporating windpower in the New England regional power system. Examples focus on the interaction of wind resources with demand-side management and supply-side options under fuel cost uncertainty.