A Multiple Criteria Decision Making and Portfolio Optimization Approach to Power Generation Planning with Application to Japan

Zhong Lisha

Abstract

Contemporary energy challenges are intensifying as conventional dominant energy sources of fossil fuel and coal gradually deplete, political instability of oil-supplying countries which disrupts energy supply becomes more prevalent, as well as the rising environmental concerns of using such energy sources. Finding and achieving a more sustainable and secure power generation system has become the goal of current politicians. While many studies have been dedicated to exploring energy planning, their scopes lack comprehensiveness and assumptions give rise to inaccuracy in the model formulated. Complementing previous works, this thesis develops a general 3-tier sequential integrated framework to provide a step-by-step guideline for policy-makers to achieve the objective of a more sustainable and secure energy structure through finding the optimal generation mix and policies.

The first step is to qualitatively select the more viable energy alternatives using analytical network process (ANP). This thesis recognizes the inter-dependencies of criteria and thus, approaches the criteria using a network of relationships instead of a hierarchical structure. A more refined, up-to-date and extended set of assessment criteria is also incorporated into the framework.

Supplementing the first step, the second step quantifies the generation mix by calculating the exact percentages of renewable and conventional energies for detailed energy planning. This is achieved through performing portfolio optimization. However, based on the current trend of development, the most likely outcome deviates from the optimal generation mix. Therefore, to bridge the gap, the third step formulates policies and through an iterative forward-backward planning process, selects, evaluates and regroups the policies to achieve the optimal scenario.

An application of the integrated framework is put into the context of Japan. Through the first step of energy selection, renewable energies including wind, solar, geothermal, hydropower and biomass are generally preferred to oil, coal and nuclear energies in developing a sustainable and secure energy system.Result of portfolio optimization shows that the optimal generation mix is one that comprises about 44% of renewable energies in Japan. For part three, three policies are identified:(1) financial support to projects on renewable energies, (2) mandatory regulations for utility companies to use a minimum amount of renewable energies for power generation and (3) public education to gain higher public acceptance. The final result shows that the hybrid policy of the three policies is the most effective in achieving the optimal power generation mix. However, it should be noted that the policy of financial support is the major factor to trigger the switch from conventional to renewable energies, whereas the other two polices are complementary in nature.