Publication:
Investments in renewable and conventional energy: the role of operational flexibility

dc.contributor.coauthorShang, Kevin
dc.contributor.coauthorYücel, Şafak
dc.contributor.departmentDepartment of Business Administration
dc.contributor.kuauthorKök, Abdullah Gürhan
dc.contributor.schoolcollegeinstituteCollege of Administrative Sciences and Economics
dc.date.accessioned2024-11-09T23:29:51Z
dc.date.issued2020
dc.description.abstractProblem definition: There is an ongoing debate on how providing a subsidy for one energy source affects the investment level of other sources. Academic/practical relevance: To investigate this issue, we study a capacity investment problem for a utility firm that invests in renewable and conventional energy, with a consideration of two critical factors. First, conventional sources have different levels of operational flexibility-inflexible (e.g., nuclear and coal) and flexible (e.g., natural gas). Second, random renewable energy supply and electricity demand are correlated and nonstationary. Methodology: We model this problem as a two-stage stochastic program in which a utility firm first determines the capacity investment levels followed by the dispatch quantities of energy sources to minimize the sum of investment and generation-related costs. Results: We derive the optimal capacity portfolio to characterize the interactions between renewable and conventional sources. Policy implications: We find that renewable and inflexible sources are substitutes, suggesting that a subsidy for nuclear or coal-fired power plants leads to a lower investment level in wind or solar energy. However, wind energy and flexible sources are complements. Thus, a subsidy for flexible natural gas-fired power plants leads to a higher investment in wind energy. This result holds for solar energy if the subsidy for the flexible source is sufficiently high. We validate these insights by using real electricity generation and demand data from the state of Texas.
dc.description.indexedbyWOS
dc.description.indexedbyScopus
dc.description.issue5
dc.description.openaccessNO
dc.description.publisherscopeInternational
dc.description.sponsoredbyTubitakEuN/A
dc.description.volume22
dc.identifier.doi10.1287/msom.2019.0789
dc.identifier.eissn1526-5498
dc.identifier.issn1523-4614
dc.identifier.quartileQ1
dc.identifier.scopus2-s2.0-85089344930
dc.identifier.urihttps://doi.org/10.1287/msom.2019.0789
dc.identifier.urihttps://hdl.handle.net/20.500.14288/12136
dc.identifier.wos565809100004
dc.keywordsRenewable energy
dc.keywordsCapacity investment
dc.keywordsVolume flexibility
dc.language.isoeng
dc.publisherInforms
dc.relation.ispartofM&Som-Manufacturing & Service Operations Management
dc.subjectManagement
dc.subjectOperations research
dc.subjectManagement science
dc.titleInvestments in renewable and conventional energy: the role of operational flexibility
dc.typeJournal Article
dspace.entity.typePublication
local.contributor.kuauthorKök, Abdullah Gürhan
local.publication.orgunit1College of Administrative Sciences and Economics
local.publication.orgunit2Department of Business Administration
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