Measuring Performance of Long-Term Power Generating Portfolios - Green Energy and Efficiency: An Economic Perspective - page 409

Fig. 15 Target curve of yearly average carbon emissions from different GB generation mixes over
2012 2032

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risks may favor technologies that to some extent; Roques et al. [ 32 ].

This reliance on one or two pillars might jeopardize another policy goal, namely
security of supply. Indeed, as these authors point out, actual electricity markets may
not appropriately signal the need for diversity and

' self-hedge '

exibility at the macroeconomic
level. In other words, there can be a trade-off between ef ciency and security.

Further, MVP theory assumes that price shocks are stochastic. However, the
fewer technologies a power system relies upon, the fewer (as a rule) the number of
suppliers, and the more the system is exposed to the (non-stochastic) effects of
collusion and monopoly; Krey and Zweifel [ 23 ]. This risk of collusion grows higher
as the number of suppliers (or energy sources) becomes lower.
To depict a possible tradeoff between efciency and security, we use several
concentration indexes to quantify fuel mix diversity. Hill [ 19 ] identi

ed and ordered

an entire family of possible quantitative measures of diversity:

" #

1

X

I

1 a

p i

D a ¼ ; a 6 ¼

1

;

i ¼ 1

where es a particular index of diversity, p i represents (in economic terms)

the relative share of option i in the portfolio under scrutiny, and a is a parameter that
inversely measures the relative sensitivity of the resulting index to the presence of
lower contributing options.

D a speci