Development of risk-averse energy supply model (ESM) under uncertainty - A case of local energy system in Iran

Stochastic bottom-up energy models have been introduced to alleviate limitations of deterministic models when uncertainties of exogenous parameters have considerable impact on changes in the energy system. A stochastic energy model with risk-neutral characteristic cannot capture the impact risks imposed on costs of the system due to uncertainties. The present paper explains the further development of an energy supply model (ESM) into a stochastic risk-averse model with the help of introducing coherent risk functions. Sources of uncertainty would be prices of primary energies and technology cost which are considered as an integral part of the model. Application of the developed risk-averse energy supply model of ESM for a case study is demonstrated in the present paper. The case study includes a province in Iran. The results of case study reveals that the effect of hedging the uncertainty within the model which result in diversification of energy technologies in the course of development of energy system and restructuring the energy supply portfolio in order to have more robust decisions and higher energy security in the long time horizon.

Keywords:

Energy system model , stochastic process , risk aversion , coherent risk measure