NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Level versus Variability Trade-offs in Wind and Solar Generation Investments: The Case of California

Frank A. Wolak

NBER Working Paper No. 22494
Issued in August 2016
NBER Program(s):   EEE   IO

Hourly plant-level wind and solar generation output and real-time price data for one year from the California ISO control area is used to estimate the vector of means and the contemporaneous covariance matrix of hourly output and revenues across all wind and solar locations in the state. Annual hourly output and annual hourly revenues mean/standard deviation efficient frontiers for wind and solar resource locations are computed from this information. For both efficient frontiers, economically meaningful differences between portfolios on the efficient frontier and the actual wind and solar generation capacity mix are found. The relative difference is significantly larger for aggregate hourly output relative to aggregate hourly revenues, consistent with expected profit-maximizing unilateral entry decisions by renewable resource owners. Most of the hourly output and hourly revenue risk-reducing benefits from the optimal choice of locational generation capacities is captured by a small number of wind resource locations, with the addition of a small number of solar resource locations only slightly increasing the set of feasible portfolio mean and standard deviation combinations. Measures of non-diversifiable wind and solar energy and revenue risk are computed using the actual market portfolio and the risk-adjusted expected hourly output or hourly revenue maximizing portfolios.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22494

Published: Frank A. Wolak, 2016. "Level versus Variability Trade-offs in Wind and Solar Generation Investments: The Case of California," The Energy Journal, vol 37(01).

Users who downloaded this paper also downloaded* these:
Sinn w22467 Buffering Volatility: A Study on the Limits of Germany’s Energy Revolution
Wolak w22503 Designing Nonlinear Price Schedules for Urban Water Utilities to Balance Revenue and Conservation Goals
Galiani and Schargrodsky w22482 The Deregularization of Land Titles
Kotchen w22246 Which Social Cost of Carbon? A Theoretical Perspective
Heal w22525 What Would it Take to Reduce US Greenhouse Gas Emissions 80% by 2050?
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us